Biopharmaceutical company Gilead has been talking up Remdesivir, a drug which proved ineffective in treating Ebola, as a treatment for those infected with Covid-19. But its latest trials haven't been peer-reviewed yet and the results have been described as statistically insignificant.
"The overnight tone was definitely risk on," said Mark Johnson, private client manager at OMF. US President Donald Trump's request that the Food and Drug Administration speed up approval of the drug was also taken as a buy signal for equities, he said.
Trump said the FDA should move "as quickly as they can" and that "we would like to see very quick approvals, especially with things that work." It isn't the first time Trump has promoted an unproven drug to treat the virus.
"It was enough to make people look through the fact that the US GDP number came in astonishingly low," Johnson said.
The data showed an annual contraction of 4.8 per cent in the March quarter compared with economists' forecasts of 4 per cent. Johnson said the US economy would only get worse in the current quarter.
"We're going to be looking at some big ugly numbers."
The Federal Reserve made it clear the US government would have to spend a lot more money than it already has to prevent deeper economic damage from the pandemic.
Early today, NZ time, Fed chair Jerome Powell "made it clear that he is not in the 'V-shape' recovery camp," said Stephen Innes, chief global strategist at AxiCorp.
"This sober assessment was taken positively. Everyone knows the recovery, using the letters analogy, will probably resemble the consistency of a spoonful of alphabet soup," Innes said.
Johnson said the market brushed Powell's comments aside to focus on the Remdesivir news. "It speaks to the market sentiment. It's looking for reasons to look through the bad news.
"I wouldn't want to try and bet against it – it's proved a lot of people wrong over the last week."
The New Zealand dollar was trading at 93.60 Australian cents from 93.26 cents at 5pm yesterday. It was at 49.27 British pence from 48.84, at 56.55 euro cents from 56.15, at 65.44 yen from 64.91 and at 4.3328 Chinese yuan from 4.3087.
The bid price on the two-year swap rate closed at 0.1425 per cent from 0.2025 per cent yesterday, and 10-year swaps were at 0.7675 per cent from 0.8000.
