Biden’s win is positive on the Australian Dollar and the AUD/USD shows sharp upmove in the first week of November, and moving to September highs.
The American elections have increased the value of risky assets like the Australian Dollar. Currencies like the Australian Dollar and the New Zealand Dollar are trade-exposed currencies, which are seeing a sharp rise. World commerce is expected to improve and easing of monetary policy in countries may improve market sentiment.
Bullish sentiment has pervaded into equity markets, which is positive for the Kiwi and Australian Dollar.
Market attention has now shifted towards the Pfizer’s COVID-19 vaccine from the US elections and Joe Biden’s win.
High-Risk Currency Demand Fuels Australian Dollar Movement
Economic data from Australia were relatively positive. The ANZ Job Advertisements, AIG Construction Index, Trade Balance, and AIG Manufacturing Index were signs of improvement that the economy was moving towards growth.
Australian Manufacturing has expanded for the first time this quarter. The Manufacturing Index has increased to 56.3 in October, which is an increase of 9.6 points. Machinery and Equipment manufacturers have shown growth. Textile, footwear, paper, and printing and clog have supported growth in the economy.
Sales have improved, showing good business confidence. Victoria, which was showing signs of contraction, faces good future prospects with restrictions lifted. New South Wales shows good expansion in new orders and sales.
Interest rates in the US will continue at 0.10%, says the RBA. Quantitative easing will help the economy to recover, says the central bank of Australia. Yields are declining after the bond-buying announcement by the RBA. 10-year bond yields were higher by 13 basis points, an increase of 0.91%, while 3-year bonds were up by 0.11% on Tuesday.
The Australian Dollar is surging upwards after US election results, moving from 0.7000 levels to 0.7350.
New Zealand Dollar on Six-Day Winning Streak
The monetary policy decision by the Reserve Bank of New Zealand on Wednesday will now remain in focus. The RBNZ may keep interest rates at the same 0.25%. A new monetary policy tool from the RBNZ is expected to allow lenders to borrow at lower rates to give a boost to the economy. Experts predict that quantitative easing may remain untouched.
The bank may not move interest rates to 0% or in the negative interest zone for now, according to analysts. Further lowering of interest rates is not expected until March 2021. Policy outlook will be the chief focus for the New Zealand dollar. NZD/USD currency pair will take direction from the central bank’s policies to be decided on Wednesday.
The NZD/USD pair has risen to March 2019 highs at 0.6850. On Monday, the NZD/USD pair rose 0.73%, with six consecutive days of gain. With Treasury bond yields rising in the United States, the New Zealand Dollar to US Dollar currency pair had to erase its daily gains.
Pfizer Lifts Sentiment
Pfizer’s announcement that its experimental COVID-19 vaccine is “more than 90% effective” has given the markets a big boost. Any vaccine is good news for global growth if it protects them from the virus and lifts the economy by 2021. The vaccine developed along with BioNTech is showing good trial results. The vaccine will bring up the US economy, say experts.
The S&P is trading on a new record high. Many Asian markets are on record highs with positive news on the vaccine.
British Pound Shows Strong Intraday Positive Move
The pound has been the worst performer among the G10 currencies last week. The weakness in the US Dollar has helped the Sterling move above the 1.300 level. On Tuesday, the British Pound saw a sudden pickup in demand, moving beyond the 1.3200 marks, which are the highs formed in September.
Chief Brexit negotiator for the EU Michel Barnie has stated that “divergent views” on the fishing and other sticky points are preventing progressive talks on the Brexit issue. With Joe Biden winning the American Presidency, the United Kingdom may not see support coming from the US. Joe Biden has been a supporter of the European Union.
The self-imposed deadline for Brexit talks on November 15 is drawing closer, and it has the last cut-off date on December 31.
England is under a national lockdown until December 2. If the virus continues unabated, investors fear that the lockdown may see an extension. The GDP in the UK expects a contraction of 2% for the fourth quarter. If the lockdown persists, the economy may contract even further for the year 2020.
For now, the jobs furlough scheme saw an extension until the end of March by the government along with quantitative easing measures.
Gold Prices Crash after Pfizer’s Covid Vaccine Results
Gold shop up sharply to $1960 in early trading on Monday, as the weakening US dollar caused a surge in gold prices. But with Pfizer’s vaccine proving to be more than 90% effective, the yellow metal is almost down by 5%, trading at $1845. If it declines further, it will see a sharp downward movement.
The dollar index, which was on a declining streak, has strengthened to 93.00 levels, bouncing from earlier lows.