NZD/USD bulls in charge to start the week

NZD/USD is trading at 0.6577 and up at the start of the week, edging higher by 0.15% at the highs of 0.6578. The move adds to the closing on Friday wh  |  12/07/2020 23:23
  • NZD/USD bulls in charge ahead of a busy week on Wall Street.
  • Correlations to asset markets will remain important for the kiwi with a firm eye on COVID-19 contagion. 

NZD/USD is trading at 0.6577 and up at the start of the week, edging higher by 0.15% at the highs of 0.6578. 

The move adds to the closing on Friday where the price was around 20pips higher than Asia's Friday closing prices.

There remains a correlation to US equities and bonds, but Friday was rather subdued, although there was some news of progress towards a vaccine which lifted spirits and kept risk assets underpinned.

"Reiterating past comments, we do not expect the NZD to carve out its own niche until we see structural changes, which is where the RBNZ suggestion that it might start foreign asset purchases comes in, possibly in August," analysts at RBNZ explained. 

Until then (or something really big comes along) we will blindly follow global risk sentiment, which seems to have the energy of a perpetual motion machine.

COVID-19 cases numbers are rapidly rising

Countries with large populations are facing second waves or an increase of the first wave. 

"The US still has the largest number of confirmed cases at nearly 3.1 million followed by Brazil (1.8m), India (820,900) and Russia (720,500)," the analysts t ANZ noted.

There are now more than 12.4 million cases of COVID-19 confirmed globally with this number doubling in the past six weeks indicating the pandemic is still accelerating. Nearly 1% of the US population have been infected with COVID-19. The number of deaths globally now stands at 559,047.

The death rate has stabilised as more cases are diagnosed earlier, isolation facilities are better managed, and more successful treatment options are identified.

Week ahead

It's earnings week and the banks will be in focus. Markets will pay a particular attention to their guidance as a means to help evaluate the sentiment going forward. 

More on this here:

  • S&P 500 Index Forecast: Bank's earnings in focus, COVID-19 induced insolvency fears simmer away

Correlations across asset classes will remain high and global themes will remain dominant.

The relations between the US and China could also kick in at some stage: US warns its citizens in China they risk ‘arbitrary’ arrest

NZD/USD levels

 

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