EUR/USD hits fresh lows on diverging vaccine progress

onday was relatively quiet in terms of major market moving news, but investors continue to remain concerned about the increase in virus cases in Europe. Officials in Germany have warned that the third wave of infection could be the worst of the lot, with additional lockdown measures and curfews possible in the coming days. At some point, the EU will catch up with the US and get to a stage where it has vaccinated enough of the population for measures to be unwound without leading to a material increase in cases or deaths. That time does, however, appear a little way off for now given the sluggish vaccine rollout in the bloc thus far, and the imposition and extension of further containment measures therefore seems inevitable.

By contrast, the US’s vaccination programme continues to go full steam ahead. President Biden has stated that 90% of all adults will be eligible for vaccination by 19th April – New York will even begin offering the jab to 16-30 year olds by 6th April. This has allowed the dollar to rally against most of its major peers in the past few weeks, with the greenback rising to its strongest position versus the safe-haven yen in around a year this morning. This week will be a hectic one in the US with a number of economic releases on the docket, notably Friday’s nonfarm payrolls release, which is expected to show another solid month of job creation. In the meantime, investors will be focusing on a speech from President Biden on Wednesday. He is expected to outline how the government plans to fund its $3 trillion stimulus programme, which could entail a sharp increase in taxes.

This week is not expected to be a particularly busy one for the pound, with few economic data releases on the calendar. Wednesday’s revised GDP data for Q4 runs on a lag and is unlikely to rock the boat, nor is Thursday’s updated manufacturing PMI for March. Focus instead continues to remain on the UK’s vaccine rollout. Supply of the AstraZeneca jab is set to slow in April, in what is now being dubbed as the ‘second dose month’. We will inevitably see a narrowing in the share of the population to have received at least one vaccine dose between the UK and just about everywhere else in the coming weeks, which may weigh on sterling to some extent. News that the Moderna vaccine could be available in the UK in the second half of next month is, however, highly encouraging and could make up much of the shortfall from the drop in supply of the AZ jab. Overall, we remain optimistic that the UK will reach the government’s target of offering a jab to everyone in the UK by the end of July, which should be bullish for the pound, in our view.