US: Greater restrictions in January, a reason to sell the dollar – MUFG

Risk sentiment is still strong but risks persist as US COVID-19 infections and deaths continue to surge. Further restrictions under a Biden presidency are on the cards, which is a reason to sell the dollar due to the economic impact of the measures, according to economists at MUFG Bank. 

Key quotes

Photo: Nikkei Asia

“Risks remain elevated and news that Astra Zeneca will run an additional trial to try and validate the 90% efficacy rate in results from a portion of its trial is concerning. It has now emerged that the portion of the trial with the 90% efficacy rate was due to a manufacturing error that was not disclosed when initial results were announced. Clearly, the biggest single risk for financial markets now is the failure of vaccines being rolled out smoothly in Q1 2021.”

“On three days over the past week, the US has reported a daily death total over the 2,000 level. On average over the past week, the US has recorded 175K new cases per day. 88,702 hospital beds across the country are occupied with COVID-19 patients – a record, according to CDC.”

“The latest available data is to Wednesday and the mobility figures were the highest for a Wednesday since Oct 14, 2020. Data from TSA revealed the largest footfall through US airports since the pandemic first started to have an impact in March. So the next few weeks could see the consequences of Thanksgiving in a further escalation of infections and deaths.” 

“There are certainly increasing calls for a national strategy to tackle the virus and it seems likely with COVID-19 figures set to be elevated when Joe Biden becomes president in January that greater restrictions are on the way. If the rest of the world is recovering by then, it could result in further reason to sell the dollar.”

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