The market mood has for the first time in weeks turned decidedly bearish with European and US equities currently down 3%. The catalyst is seemingly the rising number of covid-19 cases in many Western and Southern states in the US and localised spikes in cases in a number of countries (including Korea, India, Singapore, Germany, Poland) and cities (including Beijing, Tokyo and Melbourne), not to mention the continued and rapid increase in cases in Brazil.
As often the case in recent months more acute risk aversion has seen the Dollar rally.
Within the developed currency universe the Kiwi Dollar has underperformed in the past 24 hours although this has arguably had little to do with covid-19 (which has effectively been eradicated in New Zealand) but with the Reserve Bank of New Zealand. The RBNZ in its policy meeting overnight delivered few surprises, keeping its policy rate and QE program unchanged. However the central bank did warn that it may have to expand it asset-purchase program and that the Kiwi Dollar’s recent appreciation had put further pressure on export earnings and dampened the outlook for inflation. The Kiwi Dollar has
weakened about 1% in trade-weighted terms since pre-meeting.
