Fade any knee-jerk reaction to the NZD from political developments - NAB

Analysts at National Bank of Australia (NAB) offer insights on the impact of the upcoming New Zealand election on the domestic currency.

The New Zealand election is scheduled on September 23

Key Quotes:

“Fade any knee-jerk reaction to the NZD from political developments. No clear implications for the NZD from a change of government 

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.

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.

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.”