A narrow centre-right lead after Saturday's New Zealand election gives the New Zealand dollar mild support by reducing the immediate risk of a more dovish RBNZ mandate. The one-seat majority is fragile, though, and neither AUD/NZD nor NZD/USD has confirmed a technical reversal.
The New Zealand dollar opened the week on a firmer footing after Saturday's general election left the incumbent centre-right bloc narrowly ahead. NZD/USD rose around 0.6% from Monday's open to 0.5591, while AUD/NZD slipped 0.13% to around 1.2315.
A one-seat majority with special votes outstanding
Preliminary results gave National 42 seats, ACT 13 and New Zealand First 12. That puts the centre-right bloc at 67 seats in the enlarged 131-seat parliament, one above the 66-seat majority threshold.
However, approximately 400,000 special votes, around 14% of the eventual total, have yet to be counted. Official results are not due until November 27. Westpac considers another centre-right government the more likely outcome, potentially requiring support from the Opportunity Party.
Why the RBNZ mandate matters for the kiwi
A centre-right government would be expected to retain the existing RBNZ framework, while a centre-left administration would be more likely to restore the dual mandate covering both inflation and employment. Such a change could be relatively dovish. The provisional centre-right advantage is therefore mildly supportive for NZD compared with a left-led government.
The move itself says little about a repricing of New Zealand's politics. NZD ranked strongest among the major currencies in the early-session heat map. Asian equities rebounded, led by gains of 3.44% in the Nikkei and 1.56% in Kospi.
Technical levels still signal caution
ActionForex's technical view is that NZD/USD needs a break above 0.5709 resistance to indicate short-term bottoming. A firm break below 0.5484 would resume the long-term downtrend from 0.7463, the 2021 high.
For AUD/NZD, the cross continues to hold above the 1.2266/83 support zone. A sustained break below it would suggest 1.2600 might already be a medium-term top.
Attention also turns to Tuesday's US CPI report, which could influence the Dollar through changes in Fed tightening expectations. A December Fed rate hike carries an 80.5% probability in the latest CME FedWatch reading, so stronger-than-expected inflation could challenge NZD/USD's recovery.
Source: ActionForex
Trading involves risk.
Risk Disclaimer
