NZD has responded negatively to polls - Westpac

Imre Speizer, Research Analyst at Westpac suggests that the NZD has responded negatively to polls indicating a change of government while past elections have seen the NZD fall beforehand, and rise afterwards

Key Quotes

“NZD market reactions to election polls started in August, when surveys started revealing a sharp jump in Labour’s popularity. NZD fell sharply immediately after releases of the 6pm Colmar Brunton polls which indicated gains by Labour. The Reid poll on 12 September was an exception, showing gains by National, to which the NZD responded by rising.”

“Observation of market behaviour around polls tells us there has been an inverse relationship between the NZD and Labour’s popularity during the past month. However, it says nothing about the reasons why. For example, is the NZD pricing in expected policies from a Labour government, or is it simply pricing in the uncertainty from any change of government?”

“NZD/USD was trading around fair value in early-August, just before the first surprise poll from Colmar Brunton on 17 August. It has since moved to an undervalued state. Similarly, NZD/AUD has shed much of its significant overvaluation.”

“Whether the NZD follows the previous pattern of a postelection rise remains to be seen.”