The Pound New Zealand Dollar exchange rate has remained on relatively good form as of late, (despite a small dip yesterday following cautious comments from BoE Governor Mark Carney) though market attentions are now increasingly shifting to the fast approaching New Zealand General Election.
With a number of outcomes deemed possible, what can we expect for GBP NZD?
New Zealand General Election in the Spotlight – Volatility Forecast
The General Election in New Zealand is due to take place on the 23rd of September – an event that is likely to cause some volatility for GPB NZD.
The party currently tipped to win is the National Party, a party that has held power for some nine years.
Their primary contender is New Zealand’s Labour Party, under the leadership of Jacinda Arden, with polls placing the two neck-and-neck. So neck-and-neck, in fact, that the winner may be stuck without a majority, forcing them to seek a coalition with less popular parties in the running.
Besides the upheaval that elections tend to bring this is, in essence, the crux of investor anxiety regarding the election; that the winner might be forced into a coalition with the New Zealand First Party, an event that might eventually prompt tighter immigration rulings, thus perceivably limiting one of New Zealand’s primary forces of economic growth.
Furthermore investors are worried about the recent surge in popularity that the Labour party has received, primarily because the group also has slightly stricter immigration as one of their policies, including a pledge to cut the number down to 30,000 a year.
In this sense, the forecast for GBP NZD is positive in every outcome apart from a solid win for the National Party, with the chaos that will likely ensue from a lack of a majority (or an alternative party win) liable to send the ‘Kiwi’ Dollar tumbling.
GBP NZD and the Global Dairy Trade Auction
Another notable mover will be the latest global bi-weekly dairy auction, which will take place later today.
This event is notable because dairy is New Zealand’s largest export, thus the decided price from each auction is intimately tied to the movements of the ‘Kiwi’ Dollar.
At the 5th of September auction dairy prices demonstrated a 0.3% rise and the New Zealand Dollar saw a small boost, if such an event occurs again then GBP NZD could come under some pressure later today.
Conversely, if dairy prices fall then GBP NZD will likely extend its gains into tomorrow.
Pound Pressured by Recent Comments from BoE Carney
BoE Governor Mark Carney recently used his speech in Washington DC yesterday to slightly reign in anticipations regarding the nature of a 2017 rate hike, asserting that any increases will be ‘limited’ and ‘gradual’.
It should be noted, however, that Carney did not change his overall perspective on rate hikes; continuing to assert that they are likely to rise from historic lows ‘over the coming months’.
He stated:
‘If the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure then, with the further lessening in the trade-off that would imply, some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target’.
The market reaction was, nonetheless, limited by his comments, especially his warnings regarding Brexit and the possible continued effect it could have on the UK’s economy.
GBP NZD briefly pared some gains as a result.
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