APAC Morning Update - 20 Nov 2020

The NZD has been flying to almost a 2-year high, but though it got close, could not quite get through the 0.6950 area. The AUD has also been pushing higher but is yet to test the highs of the range around 0.7400. Recently both currencies have been trading in lockstep against the USD, but that relationship is changing somewhat. If you recall, 6 months ago the whole conventional wisdom was that New Zealand was going to a negative rate, and Australia wasn’t, and couldn’t really cut further. Fast forward to today, and it is a completely different picture. New Zealand is looking less and less likely to need to go into negative, and Australia in fact did cut, and their interest rate is now lower than New Zealand's. As we know, the main driver in currency over the medium to long term is interest rate differentials, and you can see the effects play out on the AUD/NZD rate in real-time.

While the outlook for trade between Europe and the UK remains up in the air, it turns out Covid does not need to wait for a Government green light. The EU's chief negotiator Barnier has tested positive. Usually this would be seen as pretty neutral, and only a delay to things. However, there really is not much time for things to be delayed, as we are not just down to the wire, we are already looking up at it. Good excuse to push negotiations out another year though?

Global equity are mixed: Dow -0.38%, S&P 500 -0.3%, FTSE +-0.1%, DAX -0.9%, CAC +0.5%, Nikkei -0.4%, Shanghai +0.5%.

Gold prices are down 1.2%, currently trading at $1,863 an ounce. WTI Crude Oil prices are up 0.7% trading at $41.41 a barrel.