Markets greeted the news in a positive fashion, sending stocks and risky currencies higher. Sterling was one of the best performing majors, up around one percent yesterday to its strongest position since early-June. Investors will now be eagerly awaiting news on how the next stage of human trials progresses, which will be of an even greater testing size across multiple countries. There is now real hope that a vaccine could be rolled out early-next year, which would provide a massive boost to risk assets, many of which remain suppressed relative to pre-pandemic levels.

EU leaders reach agreement on historic stimulus programme

European currencies were given an additional shot in the arm on Monday by the eagerly-awaited news that EU leaders have agreed upon the proposed 750 billion euro coronavirus rescue package.

Following a marathon summit, which lasted all throughout the weekend and into Monday, leaders settled on a programme that will see €390 billion in grants and €360 billion in loans distributed to countries hit by the pandemic, commencing on 1st January 2021. While there was fierce opposition to the composition of the plan from the so-called ‘frugal four’, a hard fought compromise was found that will see less in grants and more in loans than initially set out. As we anticipated, the passing of the proposals was largely priced in by the market prior to the announcement, so while we did see a bit of a rally in the euro off the back of the news, the magnitude of the move higher was relatively limited.

With no real economic data on tap today, currency markets are likely to be driven by ongoing reaction to both the vaccine and EU fund news. The next few days will be rather quiet ahead of a slew of data on Friday, including the Euro Area PMIs and UK PMIs.