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FxWirePro: New Zealand dollar to decline further as Jacinda Ardern to become next Prime Minister

The New Zealand dollar has declined sharply over the past two days and more paid could be in store as the Labour Party leader Jacinda Ardern is set to become New Zealand’s next Prime Minister in an unexpected turn of events. Before the September 23rd election, it was believed that New Zealand’s National Party, which has governed the country since 2008 as a minority government with support from its traditional partners like United Future, Maori Party, and ACT.

In the election, the National Party came out once again as New Zealand’s largest party but the number of seats grabbed declined from 60 in 2014 to 56 in 2017, while its coalition partners fairing terribly. Both the Maori Party and the United Future failed to win any seats in the election, while the Labour Party under the leadership of Jacinda Ardern became the biggest winner with an increase of 14 seats (compared to the last election), which pushed the total gains to 46. In a 120 member strong parliament, the coalition between the Labour Party and the Greens still fell short of a ruling majority by 7 seats and that made the New Zealand’s NZ First Party the kingmaker with its 9 seats. NZ First leader Winston Peters announced his support for a tri-party coalition with Labour.

Why don't markets like Ms. Ardern?

  • Ms. Ardern has promised higher tax rate on higher earners.
  • Labour Party is very likely to introduce capital gains tax.
  • Ms. Ardern has vowed to not raise the superannuation age unlike National leader Bill English, who promised to increase it to 67 years by 2040.
  • Farmers are likely to be charged for water via water tax
  • Ms. Ardern would charge farmers for climate-change-causing emissions.
  • Ardern is prepared to pull New Zealand out of Trans-Pacific Partnership.

New Zealand dollar:

In the past three trading days (including today), the New Zealand dollar has declined by 170 pips. Our calculation suggests that further pain could be in store. Bears are aiming for 0.645 area, however, there lies very strong bull support around 0.665-0.67 area. We recommend close monitoring. Our readers may enter short positions at correction. The Kiwi is currently trading at 0.699 against the USD.  

 

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