The New Zealand election is September 23 - this preview focused on NZD from National Australia Bank / Bank of New Zealand
The headline:
- Fade any knee-jerk reaction to the NZD from political developments. No clear implications for the NZD from a change of government
More: In brief, summary and bolding mine:
- awful performance during August, the NZD appears to be in a consolidation mode this month
- Support for the NZD is around the 200-day moving average of 0.7140 with resistance around 0.7330.
Judged by recent market movements, the market sees a Labour-led government as negative for the NZD
- sees a National-led government as positive
- we see this as an overly simplistic market reaction, and the reality is that the NZD will be driven over coming weeks and months by global forces, likely swamping any domestic political factors.
- close race
- number of possible permutations
A Labour-led government creates a more uncertain economic outlook, but what we do know is that fiscal policy will be modestly easier versus a National-led government.
- In an economy near fully employed, that adds to inflation risk and might bring forward any RBNZ policy tightening, but the devil will be in the details and it's too early to jump to conclusions.
- Notably, Labour's fiscal projections still show modestly growing fiscal surpluses over the years ahead. Thus, we certainly don't believe that the NZD will necessarily track lower on a change of government.
But some increased market volatility this week and, depending on the outcome, in the weeks ahead as coalition negotiations get underway seems like a fair assumption.
