NZ: A big week ahead with the general election still too close to call - ING

According to Viraj Patel, Foreign Exchange Strategist at ING, while usually the New Zealand’s GDT dairy auction today would be the highlight of most weeks, stealing the spotlight is the build-up to this weekend's general election (23 Sep).

Key Quotes

“Conflicting polls suggest that the outcome still remains too close to call; while the spot price may not show it, there is an air of nervousness around the NZD in the options market. We think the only clear positive NZD election outcome remains the incumbent National Party gaining a sizeable majority and forming a coalition with one of the smaller parties – but not NZ first. All other scenarios, and namely a Labour Party majority, would be NZD negative to varying degrees.”

“We see the election risks to NZD as asymmetric; greater downside potential on a Labour win  (NZD/USD falling towards 0.7000) versus limited upside potential in the event of a National minority government (NZD/USD relief rally to 0.7350). In either case, a working government may not be in place by the time markets open on Monday morning. Ahead of this, 2Q NZ GDP (Thu) may offer some election distraction.”