USD/CAD slides back to the 1.2700 as US dollar weakens

USD/CAD has slid back from European morning session highs in the 1.2780s to test the 1.2700 level again, as the loonie benefits from weakness in safe-haven currencies (including the US dollar) amid a broad recovery in risk appetite since the start European session. Currently, the pair trades with losses of around 0.3% or 30 pips on the day. 

Driving the day

In terms of the reasons as to why sentiment has taken a positive turn for the better and USD has fallen; positive vaccine news is likely helping. Moderna announced last night that it was to start investigating a booster vaccine shot (to come 6-12 months after the second dose) and Pfizer is also to look into a booster dose. Meanwhile, after the release of a decent earnings report, the Johnson & Johnson (J&J) CFO said that they expect to release Covid-19 vaccine trial data next week and that the company is very optimistic that they will be releasing a very robust data set. J&J’s vaccine is being touted as a “game-changer” in the vaccination race as it would only require one shot to acquire full immunity.

This has benefitted the loonie versus its safe haven G10 FX counterparts. However, CAD has been lagging the likes of NZD, GBP and AUD, likely due to the fact that crude oil markets have not picked up in line with risk appetite; the crude oil complex is struggling with the risks posed to near-term demand by increasingly stringent global travel crackdowns as countries take action to prevent the international spread of new variants of Covid-19.