- The New Zealand Dollar outperformed its major peers after the RBNZ stayed pat on rates
- European equities could slip as vaccine optimism fades.
- A dovish ECB could cap any selloff EU Stoxx 50 index could reverse as RSI comes out of overbought territory.
Asian bourses advanced in the Asian session as investors continued to cheer coronavirus vaccine developments.
The safe haven US Dollar edged lower versus major peers, whilst the risk-sensitive Australian Dollar and Norwegian Krone outperformed..
The New Zealand Dollar rallied after the Reserve Bank of New Zealand kept interest rates on hold at 0.25%. Gold and silver nudged higher despite a 2 basis point rise in US 10-year Treasury yields.
US mortgage applications and speeches from ECB President Christine Lagarde and Vice-President Luis de Guindos will be in focus.
Dose of Reality to Weigh on European Asset Prices
European stock markets have surged on the coronavirus vaccine breakthrough and on expectation of a less confrontational approach to foreign policy under President-elect Joe Biden’s.
However with covid cases rising and the economic picture deteriorating, investors could have gotten ahead of themselves the EU Stoxx 50 index has rallied around 20% in 6 weeks France and Germany going into month-long national lockdowns.
The Euro -area’s ZEW Economic Sentiment Index declined by 19.5 points in November to a 7th month low amid concerns of the economic recovery .
The vaccine by Pfizer and BioNTech was found to be 90% effective. However, there are still many distribution questions which remain.given that it’s a 2 shot injection that requires storage in temperature of -70 degrees Celsius.Given that the vaccine may not be widely available until mid 2021, European assets could slip lower.
Dovish ECB May Underpin EU Stoxx 50
That said, a dovish ECB could cap any losses in European stocks.
The ECB is widely expected to expand its €1.35 trillion Pandemic Emergency Purchase Program (PEPP) in December.
President Christine Lagarde confirmed that the ECB will use all the tools it has referring specifically to PEPP more than others.
The expectation of additional monetary easing could underpin European bourses near term and limit potential losses ..