Australian Dollar Rally Fuelled by Covid-19 Vaccine Success

Australian Dollar (AUD) Gains on Latest Covid-19 Vaccine Progress

The Australian Dollar (AUD) received a fresh boost as Moderna announced that its phase 3 Covid-19 vaccine trial has so far proved almost 95% effective.

This prompted market risk appetite to pick up sharply at the start of the week, buoyed by the fact that the Moderna vaccine does not require the level of low-temperature storage of Pfizer’s.

With progress towards a widely available vaccine continuing to progress, the Australian Dollar strengthened in response to hopes of the global economy returning to normal in 2021.

However, if the Reserve Bank of Australia (RBA) maintains a dovish outlook in its latest set of meeting minutes, AUD exchanges rates may lose their positive footing.

Pound (GBP) Limited as Markets Await Brexit Progress

The Pound (GBP) lacked support on Monday as investors eyed ongoing trade talks between the UK and EU, with Thursday’s deadline for a draft Brexit deal fast approaching.

As fishing rights remain a particular sticking point, markets largely lacked confidence that the UK and EU can reach an agreement in the days ahead, fuelling the odds of a possible no-deal scenario.

Without any news of a breakthrough in talks, this sense of Brexit-based uncertainty looks set to keep the Pound under pressure in the near term.

Euro (EUR) Struggles as ECB Maintains Downbeat Outlook

The Euro (EUR) struggled to make headway against its rivals in the face of the general improvement in market risk appetite as investors favoured higher-yielding assets.

As European Central Bank (ECB) policymakers maintained that economic risks remain ‘clearly tilted to the downside’, this put additional pressure on EUR exchange rates.

With further ECB commentary set for release overnight, the mood towards the Euro could remain muted.

US Dollar (USD) Slips as Risk-On Trade Dominates

The US Dollar (USD) shed fresh ground in the face of renewed market confidence over the prospect of an imminent Covid-19 vaccine.

With investors encouraged by the latest news of Moderna’s vaccine trials, the appeal of the US Dollar diminished. Signs of strength in the Chinese economy further limited safe-haven demand last night, leaving USD exchange rates on the back foot.

The strength of USD exchange rates looks set to remain limited today as forecasts point towards a notable slowdown in October’s retail sales figure.

Canadian Dollar (CAD) Benefits from Latest Oil Price Jump

The Canadian Dollar (CAD) was lifted by the latest surge in oil prices, adding to the wider sense of market optimism.

News of the Moderna vaccine’s efficacy in trials saw the price of Brent crude jump almost 4% on the day’s opening level, pushing CAD exchange rates higher. Stronger Japanese economic growth and the signing of the RCEP Asia-Pacific trade pact also encouraged demand for oil, with hopes of stronger 2021 levels of global demand rising.

Meanwhile, a stronger month of growth in wholesale sales for September may offer the Canadian Dollar an additional boost tonight.

New Zealand Dollar (NZD) Rallies as Global Growth Worries Ease

The New Zealand Dollar (NZD) strengthened on the back of yesterday’s wide improvement in market sentiment.

As worries over the global growth outlook eased in the face of the latest positive Covid-19 vaccine news, and better-than-expected Chinese and Japanese data, this shored up NZD exchange rates. While it still looks set to take months for a Covid-19 vaccine to help return the global economy to a state of normality, the prospect still lifted demand for the ‘Kiwi’.

A stronger showing from October’s performance of services index could give the New Zealand Dollar a further boost against its rivals this morning.

Data Releases

08:30 NZD Services PMI (Oct) 50.6
11:30 AUD Reserve Bank of Australia Meeting Minutes
00:30 CAD Wholesale Sales (Sep) 0.4%
00:30 USD Retail Sales (Oct) 0.5%

Louisa Heath

louisa.heath@torfx.com


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