Australian Dollar Surges on Pfizer Covid-19 Vaccine Hopes

Australian Dollar (AUD) Lifted by Pfizer’s Covid-19 Vaccine Announcement

The Australian Dollar (AUD) picked up sharply overnight thanks to news that Pfizer’s trial vaccine is currently over 90% effective in preventing infections.

Market risk appetite surged in response to hopes that an effective vaccine is now on the horizon, signalling a potential end point to the current pandemic. Although the trial will continue to run until there are 164 confirmed cases among participants, meaning no imminent release of the vaccine, this was still enough to drive a significant improvement in demand for the Australian Dollar.

AUD exchange rates could find further support this morning if the NAB business confidence index shows any improvement on the month.

Pound (GBP) Trends Lower ahead of UK Unemployment Rate

The Pound (GBP) came under pressure at the start of the week in the wake of fresh commentary from Bank of England (BoE) policymakers.

As BoE chief economist Andy Haldane indicated that interest rates are likely to remain at very low levels for some time to come, this limited the appeal of the Pound last night. While markets still see doubt over the possibility of a fresh interest rate cut, the lingering risk continued to dampen the mood towards the Pound.

The appeal of the Pound looks set to weaken further this evening as forecasts point towards an uptick in September’s UK unemployment rate.

Euro (EUR) Stumbles in spite of German Trade Surplus Widening

The Euro (EUR) failed to capitalise on the stronger-than-expected widening of the German trade surplus during Monday’s European session, going from €11.9 billion to €20.8 billion at the end of the third quarter.

With markets in a generally risk-positive mood in response to the Covid-19 vaccine news, the strength of EUR exchange rates proved limited, especially given existing doubts over the strength of the German economic outlook.

As investors expect to see the German ZEW economic sentiment index weaken on the month in November, the strength of the single currency could fade further.

US Dollar (USD) Weakens as Risk Appetite Surges

The US Dollar (USD) continued to trend lower against many of its rivals as markets reacted to Joe Biden’s victory in the presidential election, which boosted risk appetite.

Pfizer’s vaccine news put further pressure on the safe-haven asset as investors saw even further reason to sell out of the US Dollar last night.

The US Dollar could find modest support tonight if the latest JOLTs job openings figure rises as expected for September. However, the risk-on mood that swept markets will likley keep the ‘Greenback’ under pressure

Canadian Dollar (CAD) Buoyed by 10% Surge in Oil Prices

The Canadian Dollar (CAD) rallied as oil prices jumped more than 10% in the immediate wake of Pfizer’s vaccine announcement.

Investors were widely encouraged by the promise of a potential end to the ongoing Covid-19 disruption, helping to drive oil prices sharply higher.

As long as market risk appetite remains elevated, this should keep the Canadian Dollar on a solid footing against many of the majors.

New Zealand Dollar (NZD) Jumps as Global Market Sentiment Improves

The New Zealand Dollar (NZD) surged higher as a result of the general improvement in market sentiment last night.

With risk appetite lifted by both the US election news and the prospect of a potentially viable Covid-19 vaccine, there was little reason for investors not to favour the New Zealand Dollar. While the New Zealand economy has largely shrugged off the impact of the global Covid-19 crisis, a return to normal would still offer an economic boost to the country.

However, if October’s retail card spending points towards a deterioration in consumer spending, this may weigh on the ‘Kiwi’ even in the face of market risk appetite.

Data Releases

08:45 NZD Retail Card Spending (Oct)
11:30 AUD NAB Business Confidence Index (Oct) -3
18:00 GBP Unemployment Rate (Sep) 4.8%
21:00 EUR Germany ZEW Economic Sentiment Index (Nov) 41.7
22:00 USD NFIB Business Optimism Index (Oct) 102.2

Louisa Heath