10th November 2020 - Vaccine news was positive for risk sentiment but also for the US dollar.


Good Morning,

Market Headlines

Sentiment surged on some positive on reports that the Pfizer coronavirus vaccine has shown more than 90% effectiveness in preventing COVID-19, while no serious safety concerns have been observed. The positive news saw the S&P 500 rally 2.5%, the Dow Jones was +4.5%, whilst the NASDAQ underperformed with small losses. US 2yr treasury yields rose from 0.15% to 0.19%, while the 10yr yield rose from 0.80% to 0.93%. Australian 3yr government bond yields (futures) traded around 0.17%, while the 10yr yield rose from 0.76% to 0.93%. Commodities, Brent crude oil futures rose 8.1% to $42.65, copper rose 1.4%, and iron ore rose 2.9% to $121.50, while defensive gold fell 4.9%.

Currency

AUD/USD: 0.7267 – 0.7340 (a two-month high)

EUR/USD: 1.1795 – 1.1920

GBP/USD: 1.3119 – 1.3207

USD/JPY: 103.46 – 105.64

USD/CAD: 1.2928 – 1.3030

NZD/USD: 0.6797 – 0.6854 (a fresh 20-month high)

AUD/JPY: 75.28 – 77.04

AUD/NZD: 1.0680 – 1.0730

AUD Thoughts

Increased risk appetite buoyed trade-related currencies on Monday amid more optimism for the world economy following the Joe Biden victory and the Pfizer Inc PFE news. The offshore Chinese yuan hit its strongest in 28 months and the Aussie rallied to a high of 0.7338 before falling back to 0.7266 on US dollar strength.

China’s CPI & PPI inflation will be closely watched today.

AUD/USD traded to a high of 0.7338 overnight before USD demand pushed the local unit back to the 0.7280 region. Expect demand should materialise if we see any dip back toward 0.7200/20 while offering interest above the overnight highs and again at 0.7380 should slow any intra-day advancements.

Event Risk Data Today

Australia: The October NAB business survey will capture reactions to the Budget and the economy’s continued reopening.

New Zealand: October card spending expected to rise 3.0%, with weekly spending gauges pointing to firm durables demand.

Japan: The September current account surplus is expected to stabilise around JPY2025.1bn after widening in August.

China: The market anticipates that the PPI will continue to contract in October (market f/c: -1.9%yr). Meanwhile, the October CPI should moderate in the face of decelerating food price growth and sluggish underlying inflation (market f/c: 0.8%yr).

Euro Area: The widespread return to lockdown will cast a shadow over the November ZEW survey of expectations.

UK: The ILO unemployment rate is forecast to reach 4.8% in September. Ahead, the extension of the wage subsidy will provide crucial support.

US: The October NFIB small business optimism index is set to remain broadly stable at 104.4. However, the election outcome and resultant tax implications may pose a risk going forward. Following this, September job openings from the JOLTS report are expected to remain around 6500k, but labour market conditions vary substantially between sectors. Finally, the FOMC’s Quarles, Rosengren and Kaplan will speak.

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