The New Zealand Dollar fell against other currency majors such as the Australian Dollar (NZD/AUD), the Pound (NZD/GBP), the Euro (NZD/EUR), and the US Dollar (NZD) by in excess of -1.50% on Thursday morning after news broke that Jacinda Ardern, leader of the Labour party, would be taking the role of Prime Minister. The NZD/USD exchange rate is now dwelling at a four-and-a-half-month low.
This marks current Prime Minister Bill English of the National party’s second election defeat after a disastrous loss in 2002. It was the party’s worst-ever defeat. The September 2017 vote saw the National party attain 44.4% of the vote, with Labour coming in second, but neither party secured enough votes to give them the majority.
Opposition leader Jacinda Ardern’s popularity has risen quickly, as she’s shifted from the deputy leader of a failing party to Prime Minister in under three months. The Labour party has offered Winston Peters of the New Zealand First party the opportunity to become Deputy Prime Minister after he chose to form a coalition with Labour.
Thank you. pic.twitter.com/0WQkaQPD1Z
— New Zealand Labour (@nzlabour) October 19, 2017
Polls in the run-up to the event suggested that Kiwi bulls had favoured the existing government, and feared that a new government may take steps to correct the New Zealand Dollar’s overvaluation.
The Kiwi Dollar exchange rate had already been under pressure this week after the latest dairy auction showed a decline in prices, and forecasts for future payouts were downgraded.
ANZ Economist Con Williams wrote in a note to clients:
‘Combined with higher than expected milk flow from Europe in the New Year and possible unfavourable changes to the European intervention scheme, we believe this warrants some caution. Hence we downgrade our milk price forecast to 6.25-$6.50/kg MS for 2017/2018.’
The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate is currently trending at 1.1160.
The Euro to New Zealand Dollar (EUR/NZD) exchange rate resides in the region of 1.6742.
The US Dollar to New Zealand Dollar (USD/NZD) exchange rate is currently trending at 1.4207.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate is residing at levels of 1.8718.