Moderna vaccine prompts risk on move and pushes NZD back toward 0.69
Tuesday 17 November, 2020
Daily Currency UpdateThe New Zealand dollar enjoyed a strong start to the week, pushing back through 0.69 US cents amid a risk on drive. Sentiment was boosted Monday following reports US pharma giant Moderna’s Covid vaccine could be 94.5% effective. This comes on the back Pfizer announcement last week and opens the door for a mass global immunisation before years end. Having touched intraday highs at 0.6904 the NZD continues to benefit from the broadly positive risk backdrop. Vaccine hopes have prompted investors to look beyond the short-term headwinds posed by rising infections across the US and Europe. The promise of a return to an open global economy has also forced some investor to restructure monetary policy and rate expectations. With the RBNZ adopting one of the more aggressive QE programs a vaccine may afford the central bank the ability to deliver a watered-down stimulus platform through 2021, adding further upside for the NZD.
Attentions remain affixed to evolving Covid headlines with sentiment driving direction. Resistance on moves beyond 0.69 remains intact for now ahead of another risk on boost.
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.
- NZD/USD: 0.6780 - 0.6950 ▼
- NZD/EUR: 0.5720 - 0.5880 ▲
- GBP/NZD: 1.8980 - 1.9320 ▼
- NZD/AUD: 0.9390 - 0.9480 ▲
- NZD/CAD: 0.8940 - 0.9080 ▲