The political twists and turns in New Zealand
BTMU FX Strategy Research discusses the near-term outlook for NZD in light of the latest political developments.
"The policies espoused by the Labour Party are suddenly in focus today after it was announced it had reached an agreement with New Zealand First to form a government. It means the largest single party - National, with 44.4% of the vote - will be in opposition.
One difference with National that now becomes more realistic is the Labour Party policy of altering the mandate of the RBNZ to include a full employment component, essentially copying the Fed's dual mandate. That would certainly raise the prospect of looser policy ahead. However, with the unemployment rate at 4.8%, it is unlikely a change in mandate would alter near-term expectations on the policy outlook.
The New Zealand dollar was already the worst performing G10 currency versus the dollar so we would be surprised to see notable further selling after today's sizeable drop," BTMU argues.
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