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Risk narrative boosted by vaccine hopes

NZD - New Zealand Dollar

The New Zealand dollar followed a similar pattern to the AUD through trade on Monday, extending beyond resistance at 0.68 to mark fresh 20 month highs. News Pfizer and BioNtech’s stage 3 trials suggested their vaccine would be 90% effective, buoyed hopes a viable inoculation can be created in the short term, a dramatic change in the fight against Covid19. Having broken through resistance, the NZD touched 0.6855 before edging lower and bouncing between 0.6800 and 0.6840 into this morning’s open. Should the risk on narrative continue our previous top end range at 0.68 could well form as a support handle moving through the end of the year.

The NZD also outperformed against other counterparts, surging nearly 3% against the Yen, while testing new highs against the Euro and GBP. The currency remains range bound against the AUD and continues to bounce between 0.93 and 0.9360, Attentions turn to tomorrow’s RBNZ Monetary Policy Statement. With the board already adopting an extremely accommodative monetary policy program a dovish bias could take some of the sheen of the recent upturn and prompt a correction across key majors.

Key Movers

Haven currencies and the USD were the days big losers, plunging lower amid a sustained risk narrative. Buoyed by the Biden/Harris victory and reports Pfizer’s vaccine could be more than 90% effective bolster market demand for risk assets, driving equities toward record highs while dragging the JPY, CHF and USD lower. The JPY fell over 2% and the CHF gave up 1.5%, while commodity currencies soared. Outside the AUD and NZD the Chinese Yuan tested new highs touching 6.5501, while the Norwegian Kroner, Swedish Krone and Canadian dollar all enjoyed strong gains as oil prices surged. Hopes for a viable vaccine have bolstered expectations for global growth prompting a sharp correction across bond markets as investors adjusted expectations for monetary policy stimulus. A successful and widespread community immunization program should allow the re-opening of the global economy, bolstering hopes domestic markets can still rebound throughout 2021.

Attentions remain affixed to the risk narrative for now with haven currencies to remain under pressure.

Expected Ranges

NZD/USD: 0.6730 - 0.6880 ▼

NZD/EUR: 0.5690 - 0.5810 ▲

GBP/NZD: 1.9020 - 1.9480 ▼

NZD/AUD: 0.9320 - 0.9410 ▲

NZD/CAD: 0.8790 - 0.8920 ▲