Moderna vaccine spears risk on move and pushes AUD through 0.73
Tuesday 17 November, 2020
Daily Currency UpdateRisk demand received a boost overnight, following reports pharma company Moderna’s COVID 19 vaccine appears to be 94.5% effective. Hot on the coat tails of Pfizer’s announcement last week Moderna’s early analysis is hugely encouraging. Unlike Pfizer whose vaccine presents significant logistical roadblocks, given it needs to be stored at specific temperatures before use, the Moderna vaccine can be stored and transported in normal vaccine freezer conditions. Markets chased global equities and rates higher following the announcement, dragging the AUD through resistance at 0.73 to intraday highs at 0.7325. The AUD outperformed most major counterparts advancing against the JPY, CHF, Euro, GBP and CAD to start the week as markets continue to largely look past increasing COVID numbers in the US and Europe. While we have seen a number of wobbles in market sentiment amid overwhelming coronavirus infections investors have remained largely resilient and immune to the short-term headwinds. The focus remains on the longer-term outlook as vaccines make is possible to return to an open global economy. We are watching resistance at 0.7325 with a break above this handle opening the door for a push toward September highs at 0.74.
Key MoversThe USD dollar and haven currencies were broadly weaker through trade on Monday as sentiment improved following the Moderna announcement. The dollar index fell a further two tenths of a percent, edging toward a two and half year low as demand for risk drives near term shorting of the world’s base currency. Moderna’s vaccine announcement helped drive a 3% surge in oil prices, prompting strong gains for oil rich currencies like the Norwegian Krone and Canadian Dollar.
Both the Euro and the Pound offered little to excite investors as Brexit talks fail to yield any concrete evidence an agreement will be reached. UK and EU officials have entered the final week of negotiations and while a deal is possible a gap in expectations on key sticking points, namely fishing rights, threatens to derail an 11th hour trade agreement. The Euro bounced between 1.1815 and 1.1865 while Sterling broke back below 1.32 trading between 1.3240 and 1.3170. We anticipate a trade agreement will be struck before the end of the month, affording a boost to both the GBP and Euro, however failure to reach a compromise opens the door to a sharp and swift correction. Worryingly for the Euro the EU’s shared COVID 19 rescue plan appears vulnerable as peripheral countries block the EU budget and distribution of funds. Any hiccup or delay in the delivery of the program will hurt the shared currency.
- AUD/USD: 0.7180 - 0.7380 ▲
- AUD/EUR: 0.6080 - 0.6220 ▲
- GBP/AUD: 1.7880 - 1.8150 ▼
- AUD/NZD: 1.0550 - 1.0650 ▼
- AUD/CAD: 0.9480 - 0.9620 ▲