E TalkMarkets Words For Wednesday: "V" Is For Vaccine

Yesterday, the first vaccines were administered to people in the UK. Today, the first shipment of Pfizer (PFE) COVID-19 vaccines arrived in Israel, with Prime Minister Benjamin Netanyahu saying that he would be the first person in Israel to receive the coronavirus vaccine as part of a campaign to encourage inoculation.  Markets are reacting well to the inoculation news as well as to positive signs regarding a new US stimulus package before the holidays. Yesterday the S&P 500 closed at 3,702, up 10 points, the Nasdaq Composite closed at 12,583, up 63 points and the Dow Jones Industrial Average closed at 30,174, up 104 points. Currently S&P futures are trading at 3,709, up 10 points, Nasdaq 100 futures are flat at 12,633 and Dow futures are up 85 points, trading at 30,255. The Nikkei 225 closed the day up 1.33% and European bourses are trading up with the DAX ahead by about 1%. Though the FTSE is up by 0.25%, concern surrounding the Brexit negotiations will continue to create a fair amount of volatility.

TalkMarkets contributor Yohay Elam in More Money But No Honey, Lagarde May Lower The Euro If She Wants To takes a look at what's in store for EU inflation, stimulus programs and the euro (FXE) ahead of tomorrow's ECB meeting. 

Bank Note, Euro, Bills, Paper Money

Elam notes: "Euro/dollar has changed from a tightly-traded currency pair to a boasting a big breakout, hitting the highest levels seen in 32 months. While this development excites traders, it undermines the ECB’s efforts to reach its sole target of 2% or close to 2% annual inflation per year. A dearer euro pushes prices of imported goods lower and also weakens the currency bloc’s economies by making exports less competitive."

The European Central Bank is expected to take up the subject of additional funding for the EU's PEPP (Pandemic Emergency Purchase Program) at Thursday's meeting, however Elam says not all participants maybe on board given that some may feel it is better to let the vaccine do its thing on the economy as well. However his concluding take is that, "The ECB is set to add more stimulus via an expansion of some €500 billion in its bond-buying scheme but that is already priced in. For the euro to rise, the move would probably need to be larger. EUR/USD has room to fall if Lagarde warns about the exchange rate and especially if she hints at cutting rates."

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