The Australian and New Zealand Dollars are spiking to the upside on Tuesday as growing optimism about a global recovery from the COVID-19 pandemic drove investors into higher-yielding currencies.
The news initially underpinned prices while Sino-U.S. tensions kept a lid on prices. Early in the session, the trade sensitive Australian and New Zealand Dollars each rose about half a percent, but remained below last week’s highs.
The price action suggested that traders were having a hard time making a decision. The bulls were being encouraged by easing COVID-19 lockdown measures that were fueling growth optimism. The bears were being primarily influenced by the rising tensions between the U.S. and China.
However, the bulls were able to prevail sending the Aussie and Kiwi to multi-month highs as the U.S. Dollar weakened as investors shed safe-haven positions. The catalysts behind the surge in prices were the reopening economies and China stimulus expectations.
Japan lifted a state of emergency for Tokyo and four remaining areas on Monday, while many major European economies including France and Spain were also coming back to life after coronavirus-induced carbs.
Adding to the positive sentiment, the central bank of the region’s biggest trading partner, China, said it would strengthen economic policy and push for lower interest rates on loans.
In economic news, New Zealand’s Trade Balance came in better-than-expected at 1267M versus an estimate of 1250M. Meanwhile the previous reading was revised higher to 722M.
The Aussie and Kiwi should continue to be underpinned throughout the session on Tuesday as long as investors brush aside the tensions in Hong Kong and simmering U.S.-China relations and remain focused on the global economy recovery and the trend toward developing a new vaccine to combat Coronavirus.
The two currencies will face headwinds if a second-wave of the virus emerges, forcing governments to reimpose strict lockdowns and restrictions. Meanwhile, most investors are putting the bad news behind them and beginning to anticipate better time ahead.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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