• Vaccine news and Chinese data cheer risk bulls.
  • CAD bulls supported as the economy grew strong.
  • USD/CAD weak, near yearly lows.

The pharmaceutical company Moderna approaching the US and EU regulators for its Coivid-19 vaccine approval cheered investors. Equity markets started December on a healthy foot as Australia’s ASX 200 index and Hong Kong’s Hang Seng index went up more than one Percent while China’s CSI 300 surged by 1.72 Percent.

Market participants were also encouraged by the strength in China’s local manufacturing activity – indicated by a decade-high-reading in Caixin Manufacturing PMI.

The risk-on mood pushed the safe-haven US dollar and Japanese yen to negative territory while pro-risk AUD, NZD, and CAD rose.

Crude oil prices slipped below 45 dollars a barrel on OPEC+ related worries related to output talks. Gold climbed above 1780 dollars after hitting the lowest level since July.

US manufacturing PMI for November and third-quarter GDP release from Canada alongside Eurozone inflation headlines the economic docket ahead.

GDP Growth Expected

The substantial third-quarter expansion in the Canadian economy, estimated at 47.6 Percent on an annualised basis, would help the loonie to continue its recent strength. The currency has outperformed JPY and US dollar, rising more than 2.5 Percent in November against the safe-haven counterparts.

As businesses reopened and consumer spending went up – helped by government subsidies, retail sales rebounded from the April’s bottom and went above pre-crisis levels. Just two months back, the country had witnessed the most massive fall in consumer spending. The low interest-rates buoyed the housing demand and prices went up 16 Percent compared to the same period last year.

But, the chances of an economic slowdown is now higher after many Canadian provinces tightened coronavirus restrictions and the possibility of vaccinating all citizens before next September looks unlikely – as warned by Prime Minister Justin Trudeau.

The additional fiscal support totalling 51.7 billion CAD unveiled by Finance Minister Chrystia Freeland would provide a cushion in case of a fall in the economic growth. The support program covers up to 75 Percent of payroll costs, and also commercial rent and lockdown support.

The Minister has assured that the government will make suitable investments to prop up the economy, to create jobs and to prevent long-term damage from Covid-19.

Market participants might, therefore, dismiss the pandemic related worries as the government retains its whatever-it-takes fiscal approach to combat the virus-induced slowdown.