FX.co ★ Pfizer and BioNTech's invention of an effective vaccine against COVID-19 will lead to US dollar's sharp strengthening

There were no signs of strong growth in the stock and commodity markets yesterday. Investors played back the positivity after Biden's victory in the US presidential election. However, the unexpected news from Pfizer and BioNTech that their COVID-19 vaccine is already 90% successful turned everything upside down.

In the wake of this news, the European stock market surged to recent highs, and the French CAC 40 even broke them. Of course, America's three major stock indexes also rose. It was headed by the Dow 30 industrial index, which added more than 8% at the moment And although the quotes pulled back down, it still remained significantly above Friday's level. In addition, crude oil prices, which were trading near local highs at the end of October, were not left out.

NASDAQ 100 is the only stock index that did not gain positivity, as it declined due to low investor interest in the securities of companies that significantly increased during the COVID-19 pandemic.

The currency market also did not stand aside. The safe-haven currencies such as yen and franc sharply weakened against the US dollar. The gold's prices were also under the strongest pressure. This market behavior can be explained by the growing hopes of investors that the use of the vaccine from Pfizer and BioNTech will stop the pandemic, and it seems that J. Biden, who has really come to power, promises to pursue the economic policy of Mr. B. Obama, which, according to market participants, will have a beneficial effect on the relationship between China and the United States, and will also lead to the global economic recovery.

In view of recent events, we can say that our earlier arguments about the "V" shaped recovery of the US economy, which will be followed by the global one, will be implemented.

We believe that markets may consolidate in anticipation of new drivers for the growth of demand for risky assets, after yesterday's growth in demand for risky assets and today's vague dynamics in currency markets.

In terms of dynamics in the currency market, the current situation is ambiguous. The introduction of the vaccine can lead not only to a halt in the weakening of the USD, but, possibly, even to its local strengthening. The reason for this is the predicted end of the pandemic in the wake of vaccines that will stimulate the growth of the US economy, which will serve as the basis not only to stop introducing new stimulus measures, but even to reduce those already adopted. In this case, the dollar will naturally stop weakening, but even grow in relation to the main currencies.

Forecast of the day:

The EUR/USD pair is trading below the level of 1.1835. Given that it holds under this level, it is likely to further decline to 1.1785.

The USD/CHF pair is growing steadily on the back of falling demand for defensive assets. If the price breaks through the level of 0.9140, further growth can be expected towards the level of 0.9180.