Intraday Market Thoughts

The Scramble for Vaccine Begins

by Adam Button
Dec 8, 2020 12:38

We all agree that the key to economic acceleration in 2021 is a vaccine but which countries and currencies perform the best will be dictated by who can procure and deliver the vaccine first. On Tuesday we learned that the US will have an inadequate supply of one of the most-promising vaccines until the second half of the year. It may be time to start paying attention to the timeline.

The Scramble for Vaccine Begins - Tweet Telegram For Whatsapp English (Chart 1)

The vaccine is the light at the end of the virus tunnel but with the UK having already approved one candidate and the US set to do the same this week, the post-covid era is truly here. The first batch of 6.4m Pfizer doses is expected to be shipped to the US this weekend and vaccinations could start next week, with 40m doses before year end (two doses are required per person).

The Scramble for Vaccine Begins - Tweet Telegram For Whatsapp Arabic (Chart 2)

However the US has only ordered enough of that vaccine to protect 50 million people. A report on Tuesday said the US declined to order more cases in the summer and may now have to wait until June/July to get more. Other candidates may fill that timing gap but it's not certain. There appears to be some level of concern in the White House because on Tuesday Trump will sign an executive order saying that doses must go to Americans before being exported abroad. It's not clear that order will have any power.

The threat of commandeering doses paid for by other countries threatens to deepen international wounds and set off an every-country-for-itself scramble.

The EU has agreed to buy up to 300 million doses of the Pfizer vaccine but the timeline for distribution is not yet clear.

The UK has ordered 40m doses of the virus and will receive 800K on Tuesday with elderly care home residents and their caregivers at the front of the line. Some time soon the Queen will be vaccinated in what will be a powerful public message.

Canada has an interesting strategy in that it isn't at the front of the line for any vaccine but has ordered 440m doses of various vaccines at enormous cost. That's far more than needed for the 35m population but Canada will donate or re-sell unneeded supplies to developing countries in a move that could kickstart wherever they land.

With only cursory data, it appears that the US and UK will be the early winners in the G10 space. The US may have fumbled on Pfizer but there are six other leading candidates that will be approved in the months ahead, meaning that it's still likely to be widely available some time in Q2. The UK is likely to be close behind.

Other regions may be waiting until Q3, year-end 2021 or beyond for widespread availability and it's also important to note that testing has just begun on children so the timeline to vaccinate them will be long everywhere.

All of this will affect the granularities of the reopening but there are behavioural factors at play as well. Once the elderly and vulnerable are vaccinated, will places try to get back to normal?

Again, the US has shown more of a willingness than other developed countries to tolerate high infections and that may be the case again.

There's a consensus call for USD weakness in 2021 but there's also a good argument that the US economy could be a strong performer next year but it will depend on how quickly vaccine doses arrive.


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