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Kathy Lien

Kathy Lien

Kathy Lien is an Internationally Published Author and Managing Director of BK Asset Management. Her trading books include the following: 1) For beginners, “The Little Book of Currency Trading (2010, Wiley).” 2) THIRD edition of the highly acclaimed, internationally published “Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2015, Wiley).” 3) Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley) 4) High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia)

Articles by Kathy Lien

PMI Day – Will FX Traders Care?

6 days ago

PMI Day – Will FX Traders Care?
Daily FX Market Roundup 01.21.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
It has become abundantly clear over the past year that the market is driven by optimism. The COVID-19 pandemic dealt a major blow to every corner of the world but rather than worrying about how deep the impact will be on local economies, investors and central bankers are looking to the recovery. We saw that throughout the second half of 2020 and now into 2021. Yesterday’s record breaking move in the S&P 500 is a sign that investors see the glass half full and this week, it is clear that central bankers do so as well.
This morning, the European Central Bank left monetary policy unchanged and said should “favorable financing conditions be

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Stocks Cheer Biden Inauguration, FX Traders Look to ECB

7 days ago

Stocks Cheer Biden Inauguration, FX Traders Look to ECB
Daily FX Market Roundup 01.20.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
The inauguration of the 46th President of the United States went off without a hitch. Equity and currency traders welcomed the new Administration with fresh records for the S&P 500 and Nasdaq. The peaceful transition allowed investors to turn their focus to President Biden’s 100 day agenda which includes aggressive promises for more stimulus and broader vaccine distribution – the two most important ingredients for a 2021 recovery. The greenback sold off against all of the major currencies with the exception of euro and Swiss Franc because more spending and a larger fiscal deficit is bearish for the dollar.
Worries that

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Biden Inauguration & Bank of Canada: The Odds of a Micro Cut

8 days ago

Biden Inauguration & Bank of Canada: The Odds of a Micro Cut
Daily FX Market Roundup 01.19.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
It’s a big week for the financial markets. The Congressional hearings for Janet Yellen’s confirmation as Treasury secretary began today (there’s no guidance on how fast the panel will vote on her nomination) and tomorrow, Joe Biden will be sworn in as the 46th President of the United States. There are 3 central bank monetary policy announcements, PMI reports from countries around the world and Australia’s labor market report. With less than 24 hours to go before Trump leaves office, investors are optimistic. The rally in equities and currencies shows little concern about violence and punishing policies. The

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Currencies Wobble Ahead of Biden’s Stimulus Proposal

14 days ago

Currencies Wobble Ahead of Biden’s Stimulus Plan Announcement
Daily FX Market Roundup 01.13.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
It may not be long before we see more significant profit taking in equities and currencies. The signs are there – stocks hover near record highs but are struggling to extend their gains. Equities consolidated for the fifth straight day but currencies and Treasury yields are beginning to sell-off. In fact the beginning of the week decline in the euro and Japanese Yen crosses could foreshadow a deeper pullback in stocks. We’re not looking for a 5% correction, but with the Dow Jones Industrial Average hitting a record high almost every day this week since November, a pullback is long overdue.
President-elect Joe Biden

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Euro Unfazed by Merkel’s Threat of 10 Weeks of Lockdown

15 days ago

Euro Unfazed by Merkel’s Threat of 10 Weeks of Lockdown
Daily FX Market Roundup 01.12.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
The resilience of euro is remarkable. The single currency ended the day higher against the US dollar and Japanese Yen despite German Chancellor Merkel’s warning that the lockdown may last for 8 to 10 weeks if the numbers don’t improve. She reportedly told her conservative party counterparts that “If we don’t manage to hold off this British virus, we will have a 10-fold incidence by Easter.” The government also warned that there could be no travel until late May. Germany reintroduced lockdown measures in early November but restrictions that include travel limitations, closures of schools and non-essential businesses were

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Dollar Rally Gains Momentum in New Trading Week

16 days ago

Dollar Rally Gains Momentum in New Trading Week
Daily FX Market Roundup 01.11.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
As we kick off the second week of January, the greenback extended its gains against all of the major currencies. Despite the first month of job losses in April, the uptick in manufacturing and service sector activity combined with the jump in wages last month renewed demand for US dollars. Vaccine optimism is going a long way in shielding the economy from a winter downturn. Treasury yields are moving upwards with 10 year rates rising to their highest level since March. All of this tells us investors are starting to believe that the central bank is overly dovish and the economy will recover faster. In fact, Federal Reserve

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Dollar Recovers Ahead of NFPs as US Political Uncertainty Settles

19 days ago

Dollar Recovers Ahead of NFPs as US Political Uncertainty Settles
Daily FX Market Roundup 01.07.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
The US dollar traded higher against all of the major currencies on Thursday as months of US political uncertainty finally settled. Last night, Joe Biden was certified as the winner of the 2020 election and in a statement President Trump said there will be an orderly transition on January 20th. The control of Congress has been resolved with Democratic victories in Georgia. Currencies and equities cheered these developments with the Dow Jones Industrial Average climbing 211 points and the dollar rising across the board. Amidst all of yesterday’s wild developments in Washington, its easy to forget that its non-farm

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Here’s Why FX, Stocks Shrug Off Capitol Chaos

21 days ago

Here’s Why FX, Stocks Shrug Off Capitol Chaos
Daily FX Market Roundup 01.06.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
Equities and currencies traded sharply higher on Wednesday, seemingly unfazed by the chaos on Capitol Hill and in some ways, encouraged by the Blue wave. For the first time in 10 years, it appears that Democrats will have control of the House, Senate and White House. But the process has been halted by an unprecedented invasion of Capitol Hill during the Electoral vote count. It may be days before there is a final resolution but there’s very little chance the outcome will change which is why stocks and currencies held onto their gains. The objections during the Electoral college vote will only delay the inevitable. With that said,

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FX: How to Trade Georgia & Electoral College Votes

22 days ago

FX: How to Trade Georgia & Electoral College Votes
Daily FX Market Roundup 01.05.2021
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
The US dollar traded lower against all of the major currencies on Tuesday. This broad based decline is a reflection of the market’s concerns about how the US political and economic landscape could change in the next 24 to 48 hours. There are two Senate runoff elections in Georgia that will determine which party controls the Senate. Polls close at 7pm Eastern Time but if its very close, it may be hours or days before the final results are known. These Senate elections are important because they determine what type of policies will be passed over the next four years. If Raphael Warnock and Jon Ossoff, the Democratic candidates

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What’s the Chance of New Years Week FX Breakout?

29 days ago

What’s the Chance of New Years Week FX Breakout?
Daily FX Market Roundup 12.27.19
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
We’ve finally made it to the last week of 2020. A coronavirus vaccine is the process of being rolled out, a Brexit agreement is in place and President Trump finally signed the stimulus bill into law. With a few days left until the end of the year, there’s a lot to be optimistic about. Stocks extended their gains and currencies should have done the same but the rally was limited to euro, Swiss Franc and the Canadian dollar. Other currencies like sterling declined and while this move may seem counterintuitive after years of waiting for an agreement, investors have Brexit exhaustion.
Euro has been one of the strongest currencies this

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Year End FX Sell-Off? No Yet.

December 23, 2020

Year End FX Sell-Off? No Yet.
Daily FX Market Roundup December 21, 2020
We feared that there would be year end profit taking in currencies this week as the virus mutation and lack of Brexit progress haunts the markets. But so far, we haven’t seen any evidence of those risks turning into fear. Stocks resumed their rise and currencies followed suit. A large part of that has to do with medical experts assuring the general public that there’s no reason to believe the vaccine won’t work on the new strain which doesn’t appear to be more deadly. However the US stimulus package still hasn’t been passed – President Trump vetoed the agreement, demanding bigger checks for Americans. The House responded quickly with plans to bring up to the floor legislation that would provide $2,000 direct

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How the US Dollar Could Trade this Holiday Week

December 21, 2020

How the US Dollar Could Trade this Holiday Week
Daily FX Market Roundup December 21, 2020
The second to last week of December kicked off with losses in currencies and equities. By the end of the NY session however, much of the weakness eased leading many investors to wonder if anything could sap the equity rally. The Dow Jones Industrial Average fell more 400 points shortly after the NY open but ended the day flat. The dollar started the day strong but gave up part of its gains as well. This is a shortened trading week but a variety of factors could influence how the dollar trades. Congress reached an agreement on a $900 billion coronavirus relief package that would keep millions of Americans from losing their jobless benefits. This is no panacea for the economy but its a breath of

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Dollar Bounces as Market Waits for Stimulus Deal

December 18, 2020

Dollar Bounces as Market Waits for Stimulus Deal
Daily FX Market Roundup December 18, 2020
It has been a challenging week for the US dollar. The greenback fell to fresh 2.5 year lows against most of the major currencies but as the week drew to a close, it finally rebounded. While some may hope that this marks a bottom for the dollar, there’s scope for further losses in the coming week. Vaccine progress and the prospect of a stimulus deal are some of the main reasons for the dollar’s weakness and that is not expected to change. Stimulus talks are progressing and there’s talk that an agreement may be reached over the weekend. While it falls significantly short of the support offered in March, it would provide millions of Americans with much needed relief. Moderna is on track to have

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FX Risk Rally Continues as Stimulus Prospects Grow

December 17, 2020

FX Risk Rally Continues as Stimulus Prospects Grow
Daily FX Market Roundup December 17, 2020
Risk appetite remains strong with equities and currencies extending their gains on Thursday. The growing prospect of a stimulus deal in the US and a Brexit agreement in the UK drove investors out of safe have currencies like the US dollar and Japanese Yen. High beta currencies took flight with strong gains in sterling, the New Zealand and Australian dollars. The greenback fell to fresh 2.5 year lows on the back of mostly weaker data. Although building permits rose strongly, housing starts grew at a slower pace, the Philadelphia Fed index tumbled to 11.1 from 26.3, a reading that was much weaker than anticipated. Most importantly, jobless claims continued to rise from 853K to 885K, reinforcing

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Fed Ups Growth Forecasts, Dollar Slide Continues

December 16, 2020

Fed Ups Growth Forecasts, Dollar Slide Continues
Daily FX Market Roundup December 16, 2020
The Federal Reserve’s monetary policy announced failed to stem the dollar’s slide. The greenback traded lower against most of the major currencies with the only exceptions being the Canadian dollar and Swiss Franc, which rallied on the back of short covering. On balance, the outcome of the FOMC meeting was less dovish. The central bank left interest rates unchanged, dialed up their expectations for growth and put some specific numbers around their Treasury and mortgage backed securities purchases. They didn’t extend the maturity of asset purchases which was widely anticipated and the decision to be less aggressive is supported by Fed Chairman Powell’s view that the economy should perform

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How Fed Easing Could be DXY Positive

December 15, 2020

How Fed Easing Could be DXY Positive
Daily FX Market Roundup December 15, 2020
Currency traders should brace themselves for a very busy 24 hours. The list of market moving economic reports scheduled for release is long and includes the Federal Reserve’s monetary policy announcement, US retail sales, EZ and UK PMIs, along with the UK and Canada’s CPI reports. Any one of these reports could set off big moves in FX but collectively there’s serious risk of volatility, divergences and trend reversals. Over the past month, the US dollar has fallen steadily to 2.5 year lows against the euro, Swiss Franc, Canadian, New Zealand and Australian dollars. The ongoing pandemic and lack of additional fiscal stimulus has drawn investors out of the greenback and sparked expectations for Fed easing

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Big Events this Week, What Does it Mean for FX?

December 14, 2020

Big Events this Week, What Does it Mean for FX?
Daily FX Market Roundup December 14, 2020
The last full trading week for 2020 will be a busy one. There are four central bank meetings, December PMIs, employment and consumer spending reports from many countries on the calendar. In fact, not even one major economy escapes the release of market moving data. With that in mind, the main focus will still be on the US dollar. Investors continued to sell dollars on Monday, kicking off what could be the fourth straight week of losses. Low interest rates, reserve diversification and a global vaccine rollout are all reasons for the dollar’s decline. US stocks consolidated but its record breaking moves this month reflects the shift into risk assets, which is consistent with the dollar losing its

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Currencies Struggle as Brexit and US Stimulus Hopes Fade

December 11, 2020

Currencies Struggle as Brexit and US Stimulus Hopes Fade
Daily FX Market Roundup December 11, 2020
Currencies were driven lower on Friday on fading hopes for Brexit and US stimulus deals. For most of this year, investors believed that the UK would eventually cave and agree to an orderly exit out of the European Union. However with only a few weeks before their deadline, the final round of Brexit talks are failing quickly with both sides preparing contingencies. In the US, lawmakers are expected to pass a one week spending bill to fund the government but the House has indicated that anything beyond that would require agreement to a broader fiscal stimulus plan. Unfortunately very little progress has been made and Senate Republicans say they do not have majority support for the

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How Much Can Euro Rise After ECB?

December 10, 2020

How Much Can Euro Rise After ECB?
Daily FX Market Roundup December 10, 2020
Euro resumed its rise against the US dollar after the European Central Bank boosted asset purchases on Thursday. Having telegraphed their plans to ease as far back as October, today’s decision was widely anticipated. In yesterday’s note, we argued that unless their actions were more aggressive, EUR/USD could see a post ECB rally.
EUR/USD traded higher but its gains were modest, reflecting the currency’s overstretched move. The central bank increased their Pandemic Emergency Purchase Program by $500 billion, right in the middle of the market’s $400 to $600 billion estimate. They also extended the program to March 2022 from middle of 2021. Most market watchers were looking for an extension to end of 2021 and

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The Risk of Post ECB Euro Rally

December 9, 2020

The Risk of Post ECB Euro Rally
Daily FX Market Roundup December 9, 2020
Thursday’s European Central Bank monetary policy announcement is the most important event risk this week. The ECB is widely expected to ease monetary policy, making them one of the few central banks actively fighting COVID-19’s economic impact with fresh stimulus. Normally the prospect of new easing should be negative for a currency but investors bid EUR/USD sharply higher last month and there’s serious risk of a post ECB euro rally.
When the central bank last met in late October, ECB President Lagarde said they are looking to recalibrate all instruments at their next policy meeting. She warned that a contraction can’t be ruled out for the fourth quarter and there’s “little doubt” that more stimulus is needed

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Will USD/CAD Fall to New 2 Year Lows on Bank of Canada?

December 8, 2020

Will USD/CAD Fall to New 2 Year Lows on Bank of Canada Announcement?
Daily FX Market Roundup December 8, 2020
Will USD/CAD fall to fresh 2.5 year lows on the heels of the Bank of Canada monetary policy announcement? Probably not.
Unlike the European Central Bank who is widely expected to ease monetary policy, no action is expected is from the BoC. The central bank left monetary policy unchanged when they last met in October and at the time, they said the 2020 contraction will be smaller than previously forecast but growth in 2021 will be weaker. Now in December, there are legitimate concerns about growth. Lockdowns have been imposed throughout the country as new coronavirus cases hit record highs. On Monday, more than 7800 cases were reported, well above the May peak of 2760.

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What’s Moving in FX this Week? Euro vs. Dollar

December 7, 2020

What’s Moving in FX this Week? Euro vs. Dollar
Daily FX Market Roundup December 7, 2020
For the past few weeks anti-dollar flows have been the driving force for currencies. The sell-off in the dollar drove euro, sterling, Swiss Franc, Australian, New Zealand and Canadian dollars to multi-year highs. While the greenback continued to fall on Monday against most currencies, we’re also beginning to see more two way action as investors look to take year end profits on short dollar positions. There’s very little on the US calendar this week with the exception of inflation data. Prices are expected to rise, due in part to the higher cost of fuel, but inflation in the US is very low so an uptick will have zero bearing on Fed policy. With that said, investors could find a stronger number a

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Dollar Unfazed by Weak Payrolls – Here’s Why

December 4, 2020

Dollar Unfazed by Weak Payrolls – Here’s Why
Daily FX Market Roundup December 4, 2020
One of the most important pieces of data this week was November non-farm payrolls. The softer release should have sent the dollar tumbling lower but instead the greenback ended the day sharply higher against most of the major currencies. This same strength can be seen in stocks, which soared to record highs.
So why are investors buying the dollar and stocks on a lackluster jobs report? The answer is simple.
Everyone knows that this latest pandemic wave hit the US economy hard but with local governments crafting plans for vaccine distribution and Congress working towards a new stimulus deal before the end of the year, investors see pent up demand as 2021’s primary source of recovery. Even

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5 Reasons Why EURO Broke 1.20

December 1, 2020

5 Reasons Why EURO Broke 1.20
Daily FX Market Roundup December 1, 2020
Against all odds, euro climbed to its strongest level versus the US dollar in more than two years. Not only was the single currency the day’s best performer but it surge well above 1.20, rising to its highest level since May 2018. For many, the persistence of the euro’s rally has been perplexing as there was only one down day in the last six. However we don’t need to dig deep to find drivers for the move:
#1 US Dollar Weakness
There’s no coincidence that the euro’s rally coincides with broad based US dollar weakness. The Dollar Index may be up today, but it is still trading near 2.5 year lows. Concerns about a spike in coronavirus cases after Thanksgiving and Federal Reserve Chairman Powell’s promise to keep

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Dollar Falls to 2.5 Year Low, 6 Things to Watch

November 30, 2020

Dollar Falls to 2.5 Year Low, 6 Things to Watch this Week
Daily FX Market Roundup November 30, 2020
The US dollar index plummeted to a 2.5 year low on Monday as investors worry about rising virus cases, fresh lockdowns, holiday spending and the Federal Reserve. With US virus cases topping 4 million in November, in-store Black Friday sales fell 52%. Online spending was strong, rising 22% from the year prior but this increase and month long promotions may not be enough to save retailers who have seen their 2020 earnings squeezed hard by the pandemic.
Softer US economic data contributed to the slide but this move has been months in the making. Shortly after the pandemic began, the greenback peaked and by late May it started a slide that took the Dollar index from 100 to under 92

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Thanksgiving FX Breakouts

November 24, 2020

Thanksgiving FX Breakouts
Daily FX Market Roundup November 24, 2020
Traditionally investors expect the financial markets to be quiet and consolidative during shortened trading weeks. There’s usually less participation and less liquidity as investors square their positions and close their books early. 2020 has been a year like no other and we would not be surprised to see new multi-month highs and lows set in currencies this week. In fact, there’s precedent. EUR/USD and USD/JPY actually have a history of breaking out or reaching new milestones Thanksgiving week. Just take a look at the charts below:
In 2019, USD/JPY hit a 6 month high the day before Thanksgiving while EUR/USD hit a 1 month low the day after Thanksgiving. There were no milestones in 2018, but in 2017 EUR/USD and

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Dollar Jumps on Strong Data

November 23, 2020

Dollar Jumps on Strong Data
Daily FX Market Roundup November 23, 2020
The US dollar traded higher against most major currencies on Monday. The gains were sharp and abrupt, coming shortly after Markit Economics’ PMI reports. According to the latest numbers, manufacturing and service sector activity expanded at a faster pace in the month of November. This improvement is a surprise considering that COVID-19 cases shot up this month forcing states to roll out new restrictions. However these statistics also explain why some governors have gone to lengths to avoid new restrictions despite alarming coronavirus cases. At some point with hospitals overwhelmed they may need to consider but in the meantime, the fear of what’s to come after Thanksgiving did not stop equity and currency

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Will Eurozone PMIs Set Top for EURO?

November 20, 2020

Will Eurozone PMIs Set Top for EURO?
Daily FX Market Roundup November 20, 2020
For the past few weeks we’ve been talking about the incredible resilience of the euro. The largest countries in the Eurozone went into lockdown mode at the end of October and today Germany is talking about extending their partial lockdown for another month. Unlike France and Spain who have seen their new virus cases fall, Germany and Italy are still struggling to contain their outbreak. The difference between France and Germany is that in Germany shops are open and in France, only essential businesses can operate. Regardless these lockdowns will take a significant toll on the region’s economy and reinforce the European Central Bank’s need to ease. If they’re lucky, the Eurozone will avoid a double dip

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Currencies Recover on COVID-19 Stimulus Talk

November 19, 2020

Currencies Recover on COVID-19 Stimulus Talk
Daily FX Market Roundup November 19, 2020
At the start of the New York trading session, all of the major currency pairs from EUR/USD to USD/JPY were headed lower. That was the trend for most of the morning, but mid day, Senator Chuck Schumer said Senate Majority Leader Mitch McConnell has agreed to restart coronavirus stimulus talk. Investors cheered this news, sending stocks back into positive territory. Currencies followed suit with euro, sterling and other major currencies erasing all of its losses to end the day higher versus the greenback. Although USD/JPY and USD/CHF lost value, their sell-off were moderated by the turnaround in risk.
The Philadelphia Fed index and existing home sales report also show the US economy performing

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Why FX Traders Shrugged Off Pfizer’s Update

November 18, 2020

Why FX Traders Shrugged Off Pfizer’s Update
Daily FX Market Roundup November 18, 2020
The big story in the news today was Pfizer’s vaccine update – their results now show their vaccine being 95% instead of 90% effective in preventing coronavirus. This exceeds the 94.5% effectiveness reported by Moderna earlier this week. Unfortunately currency and equity traders were not impressed.
The problem is that while investors believe pharmaceutical companies are near the finish line, they understand that widespread dissemination can’t happen until spring of 2021 at the earliest. Moderna, whose vaccine has a longer shelf life and can be stored at -20 degrees Celsius (temperatures closer to a regular freezer) versus Pfizer’s -70 degree Celsius (colder than Antarctica), detailed the

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