The forex market remains volatile at the best of time, with this helping to drive demand in currency as a derivative asset and accounting for global trading volumes of $6.6 trillion each day.
However, the market has experienced more volatility and uncertainty than usual in the wake of the coronavirus pandemic, particularly as quantitative easing measures have caused currency values to fall across the globe.
However, the rollout of a vaccine in various countries has provided some much-needed hope, but this has yet to translate into growth for currencies and stocks. The question that remains is whether this trend will begin to take hold as 2021 gets underway?
The Covid-19 Vaccine and the Story so Far
Australia is also one of several nations that are looking to accelerate the process of approving and rolling out the vaccine on a national scale, with the federal Labour leader Anthony Albanese looking to drive distribution immediately after the vaccine has been approved by the Therapeutic Goods Administration in January rather than waiting until March.
Despite this and the fact that first doses have already been administered in countries such as the UK, however, this has yet to deliver a sustained boost to the world’s stock markets.
For example, Wall Street remains gripped by uncertainty as investors await the official approval of the vaccine, with the Dow and S&P 500 stocks off to a particularly disappointing start this week. The latter took a particularly hard hit on Monday, as coronavirus cases continued to rise stateside and dwarf the positive impact of the potential vaccine rollout.
As for the US Dollar Index, this faced resistance near the 90.70 mark of late, thanks largely to the principle agreement of a $900 billion stimulus package to help combat the socio-economic impact of the coronavirus.
Naturally, this has caused the greenback to lose value against a number of major currencies of late, despite the vaccine developments and the rush to approve it in the US.
What’s the Outlook for Stocks and Currencies?
Edward Moya, a Senior Market Analyst at Oanda, has noted the rise of big tech stocks as the US struggles to contain its coronavirus outbreaks and coordinate a vaccine rollout, with this continuing a trend that took hold throughout the first three quarters of 2020.
It should also be noted that the S&P threatens to end the year on a high, with some of its most recent losses having been eradicated in mid-week. If this trend continues, stocks could well be headed higher into 2021, with further growth expected as economic growth returns at the beginning of the New Year.
As for currencies, they’ll continue to fluctuate until a global vaccine rollout has been completed.
After all, the UK is already poised to enter a new national lockdown in the New Year and after Christmas, while the continued use of stimulus measures throughout the world will continue to drive down currency values across the board.