Morning Commentary: New Zealand: The Other Election

Foreign Exchange - Morning Commentary
New Zealand: The Other Election 
Share this story:
Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
New Zealanders will head to the polls for the country’s general election on Oct. 17. Unlike elections in the U.S., the elections in New Zealand haven’t been an important topic in the markets because of the low uncertainty around the outcome. 

At its peak level in August, Labour Party support surpassed the 50% mark, consistent with an outright win. Since then, support has pulled back slightly and indicates another minority government as the most likely outcome. Despite this slight pullback in support, the key takeaway is that polling data has consistently projected a wide advantage for the incumbent Labour party — the latest polling data shows 46% support for Labour versus 31% for the National Party. 

As a result of these stable polling trends, markets have priced very little risk premium around the possibility of a political surprise on Election Day. With all reasonable outcome possibilities unlikely to trigger a material change in New Zealand’s growth outlook and fiscal policy, monetary policy remains the key driver for the New Zealand dollar. A notable development on this front has been recent comments from the Reserve Bank of New Zealand (RBNZ) Chief Economist Yuong Ha, who stated that the central bank preferred “to do too much too soon than too little too late.”  

This statement should put greater attention on the RBNZ’s Nov. 11 meeting. This Nov. 11 meeting was already important, as it is expected to bring clarity to the recently announced Funding for Lending scheme. But now, markets will also be watching for the possibility of further dovish developments. Of course, the Reserve Bank of Australia’s (RBA) Nov. 3 meeting will also merit monitoring given the link between New Zealand and Australia and recent dovish comments from the RBA that have raised expectations for further easing. 
  • U.S. stimulus headlines continue as Treasury Secretary Steven Mnuchin told House Speaker Nancy Pelosi that President Donald Trump would personally lobby Senate Republicans to support any deal reached between the White House and Democrats. Despite these headlines, it appears unlikely that Senate Republicans will be convinced to spend more, as they are set to vote on an even smaller package than their previous $500 billion proposal. 
  • U.S. retail sales blew away expectations by rising 1.9% month over month against expectations for a 0.8% increase. Conversely, industrial production contracted 0.6% month over month against expectations for a 0.6% increase.
  • Brexit talks have turned negative again, with Prime Minister Boris Johnson warning that the U.K. was ready to leave without a deal. Given this, talks planned for next week will still go ahead, with Prime Minister Johnson indicating he will listen if EU leaders table a new option. The pound whipsawed on these headlines and ultimately ended up where it started, illustrating the high level of uncertainty around talks.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2020 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?