The US Electoral College Confirms a Biden Presidential Win
After what should not have been a nail-biting event, Joe Biden has been confirmed President of the United states by the Electoral College. At 306 votes for Biden versus Trump’s 232, not a single State voted against the election results, which also means the 6 States Trump contested also fell in line. At this stage of the process, the race is usually considered over as the electoral college votes merely serve as a formality to the election. Yet, with a relentless push from President Donald Trump to overturn or undermine the results via the courts, social media and rallies, few were going to take today’s electoral votes for granted.
S&P 500 futures ticked 7.5 points (0.2%) higher on the result in early Asian trade, marginally paring losses sustained during the overnight session on Wall Street.
Vaccines Rolled Out in the US but Delays Are to Be Expected
The first COVID-19 vaccine created by Pfizer (PFE) and BioNTech (BNTX) was given to a front-line intensive care nurse in the US, just as daily deaths topped 3,000. Given the rising death rate during winter and a vaccine rollout that has been described as “the most difficult vaccine rollout in history” by the US Surgeon General Jerome Adams, challenges certainly await from a logistical and economical viewpoint. And Wall Street appears to agree according to the “buy the rumour, sell the fact” price action overnight.
Despite a strong start to the session, the S&P 500 (US500) closed -0.4% lower with Pfizer (PFE) falling -4.7% as traders continued to book profits. The Dow Jones (US30) was dragged lower by Disney (DIS) after the ‘stay at home’ beneficiary stock was downgraded in light of the vaccine being released.
For a brief moment, the US dollar index (DXY) hit its lowest level since April 2018. Yet its failure to hold beneath 90.48 support further strengthens our view that bears may be forced to cover and send the dollar higher as part of a correction against its established downtrend. In turn this could see majors such as EUR/USD, AUD/USD and NZD/USD reverse course and retrace lower.
The “Narrow Path” to Brexit Supports Sterling, Covid-19 Rages On
Initially, delayed deadlines give the impression that negotiators are simply kicking the can down to the road. But it can also be seen that these deadlines are more fluid then either side makes out. And whilst there’s hope for an agreement, the British pound remains supported.
The two key themes for the UK remain in full force; Brexit negotiations and rising COVID-19 cases. Whilst the two scenarios are not directly linked, the economic impact of them surely are. Yet that has not stopped large traders flipping to net-long exposure on British pound futures last week as they bet the vaccines will taper the virus and a trade deal between UK and EU will be made.
Yet over the near-term Brexit headlines remain the key driver for sterling. UK’s PM Boris Johnson continues to play chicken with a hard Brexit by saying the scenario is a “strong possibility” and “very likely”. Yet EU’s Chief Brexit negotiator Michael Barnier still sees a deal as a possibility, even if the next two weeks remains “critical” and the path there does seem narrow. And the decision to extend trade talks into the last two weeks of December keep the potential of a trade deal on the table. Initially, delayed deadlines give the impression that negotiators are simply kicking the can down to the road. But it can also be seen that these deadlines are more fluid then either side makes out. And whilst there’s hope for an agreement, the British pound remains supported.
The British pound was the most volatile major currency overnight. After producing a bullish gap on Monday’s open, GBP/USD managed to extend its lead by a further 1.25% before reversing course and trading lower for the session, yet just above Friday’s close. So whilst the session appears to be bearish for the day, it remains bullish relative to Friday’s low at 1.3135 (or -1.33% lower from current prices).