Markets largely shrugged off commentary from Federal Reserve Chair Jerome Powell. While some recent economic indicators point to stabilisation, he said "the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery."
Powell, who was giving his semi-annual monetary policy report to Congress, said that "a full recovery is unlikely" until the public is confident that the disease is contained.
Capital Economics was also more upbeat about China following recent data.
"Recent data suggest that the recovery is progressing faster than we had anticipated a couple of months ago. In particular, the activity and spending data published yesterday imply that economic output stopped contracting year-on-year in May. High-frequency data suggest that the recovery has extended into June. Given this, the economy now seems likely to expand 2 per cent in Q2," it said.
While investors remain upbeat, concern about new outbreaks of covid-19 hover in the background.
Risk appetite did waver slightly on news authorities in Beijing have imposed a soft lockdown on the entire city, after the Chinese capital reported more than 100 new locally transmitted coronavirus cases in the past five days.
The city raised its alert level from Level 3 to Level 2 - the highest alert being Level 1 - the Beijing government's Deputy Secretary Chen Bei announced in a press conference reported by CNN.
The New Zealand dollar "spent yet another night slavishly following the S&P500 index, almost reaching 0.65 at one point before experiencing a mini-flash crash as news broke that China had shut schools and moved to covid-19 level two," said ANZ Bank.
The kiwi was trading at 64.49 US cents at 8am in Wellington versus 64.83 cents at 5pm in Wellington
"New breakouts of the virus remain a risk in the background, and we got a taste of it with two imported cases here yesterday," ANZ bank agricultural economist Susan Kilsby said.
Prime Minister Jacinda Ardern told a Facebook live post late yesterday the "checks and balances" in the country's quarantine regime were not adequate and the situation "cannot be repeated."
The kiwi, however, may be supported after a lift in global dairy prices overnight. The Global Dairy Trade price index gained 1.9 per cent, slightly more than expected, driven up by a solid gains in milk powder prices, said Kilsby.
"The world appears to be in full-fledged recovery post-covid-19 lockdowns with many countries opening back up. As markets reopen many countries are finding their economies in better shape than expected, reflected in currency improvements aiding buyers' affordability in refilling their pipelines," Rabobank said in a note after the dairy trade auction.
- BusinessDesk
