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Kiwi outstrips most majors as promise of vaccine drive risk appetite

NZD - New Zealand Dollar

The New Zealand dollar rallied through trade on Monday, bouncing 1.6% as a risk on move helped drive the currency back above 0.60 US cents. Having traded sideways through much of the domestic session the NZD found support on heightened risk demand following reports of a promising vaccine trial by US pharma company Moderna. Initial testing suggests the vaccine does prompt an immune response capable of fighting the current coronavirus strand, with broader human trials set to begin by July. The promise of a vaccine and a broader increase in mobility across developed countries amid easing restrictions helped bolster optimism and drive an upturn in risk demand. The swift correction in risk sentiment, following a week of largely negative risk plays, highlights the ongoing uncertainty plaguing markets at this time as volatility is expected to continue through the short and medium term.

The NZD gained not only against the USD but bounced against key crosses as well, up seven tenths of a percent against the Euro, pushing through 0.55, advancing against the Pound, while surging 2% against the Yen as soft GDP data and risk on move forced investors away from the haven asset. Attentions remain squarely affixed to the ongoing risk narrative with Global Diary prices and commentary from Fed Chair Jerome Powell dominating the macroeconomic docket through trade today.

Key Movers

The Euro jumped through trade on Monday as the US dollar, Japanese Yen and Swiss Franc struggled to mount any upward momentum in the face of broadly positive risk on move. The combined unit pushed through 1.09 advancing eight tenths of a percent to touch intraday highs at 1.0926 after France and German announced a framework for a 500billion Euro bailout/recovery fund. Importantly the fund will allow the EU commission to borrow money direct from the market and issue grants, not loans, to those member states that desperately need support. While the agreement still requires the backing of all 27 member countries and resistance is expected from Austria, the Netherlands, Denmark and Sweden it is at least a step in the right direction, creating the foundations for a wider European agreement on joint debt.

The Japanese yen was the weakest of majors through trade on Monday as risk demand drive investors away from haven assets, while GDP data showed the Japanese economy shrank through Q1 with expectations Q2 will see an even bigger contraction as Coronavirus amplifies uncertainties.

The Great British Pound bounced of 8-week lows as broad based USD weakness and the risk on mood helps shift the focus away from stalled Brexit negotiations and suggestions the Bank of England may employ negative interest rates in a bid to bolster economic activity. Climbing off 1.2075 Sterling touched intraday highs at 1.2226 before edging lower into this morning open.

Expected Ranges

NZD/USD: 0.5930 - 0.6130 ▲

NZD/EUR: 0.5420 - 0.5580 ▲

GBP/NZD: 2.0020 - 2.0420 ▼

NZD/AUD: 0.9210 - 0.9330 ▲

NZD/CAD: 0.8350 - 0.8490 ▲