| Vaccine efforts in Europe have led to significant improvements in the pace of vaccinations across the Big Four (Germany, France, Italy and Spain). Over the past few weeks, the number of daily doses per million residents has risen 33% to 4,000–4,500 doses. The primary driver of this increase appears to be improved vaccine supplies of both the Pfizer and AstraZeneca vaccines. Additionally, a smaller percentage of delivered doses are being stockpiled. This is especially true in the case of the Oxford vaccine. As a result of this, Germany, France, Italy and Spain have given at least the first dose to 15% of their population. |
Notably, data has yet to show strong signs of reluctance to be vaccinated by the AstraZeneca vaccine. On April 7, the European Medicines Agency reported a possible causal link between the AstraZeneca vaccine and unusual blood clots. Even though this side effect is extremely rare, many European countries, including the Big Four, have put restrictions on the administration of this vaccine to people older than 60 (55 in France). Nevertheless, data shows that first-dose vaccinations with AstraZeneca bounced back quickly after the brief suspension in March. Additionally, despite new deliveries, the share of delivered doses that have been administered continues to rise, particularly in France and Spain. Given this, unwillingness to be vaccinated with the AstraZeneca vaccine could start to show once waiting lists for vaccines get shorter.
Fortunately for Europe, vaccine supplies continue to improve, opening up room for continued improvements in the pace of daily vaccinations. Johnson & Johnson’s decision to halt its European rollout, which was originally planned for this week, does represent a headwind, but expected supplies were limited anyway. Thus, the suspension shouldn’t have a material impact as long as it is temporary and countries remain primarily reliant on Pfizer and, to a lesser extent, AstraZeneca. Further, the recent sharp increase in daily vaccinations is also an encouraging sign that the vaccine distribution system is able to keep up with increased supply.
As for the euro, the single currency has done much better since the start of Q2 relative to its performance in Q1. But the euro’s recent move higher appears to lack a convincing fundamental basis. Whether or not the euro is bottoming out in a durable way will depend on whether the fundamentals that have pulled the euro down (growth expectation and yield gaps between the U.S. and Europe) are close to reversing. While much of the good news on U.S. fiscal policy has been priced in, and Europe is catching up on vaccines, it isn’t certain that growth expectations will shift in the euro’s favor. A material recovery in the euro will require not only a reopening of the European economy, but a growth bounce that exceeds expectations. It also likely requires U.S. growth to disappoint in outright terms. Even though the vaccine picture is improving, it is difficult to paint a positive euro picture when markets can only price in one 25 bps hike by 2025 in Europe versus one hike by late 2022 in the U.S.
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