NZD: Guided by the politics – RBC CM

NZD initially rallied above 0.70 after PM Ardern said she would raise the minimum wage, only to sell off sharply to 0.6936 after she reiterated she would review the Reserve Bank Act without giving further details, points out the research team at RBC Capital Markets.

Key Quotes

“Labour has previously proposed the addition of full employment to the RBNZ’s existing mandate of price  stability  and  that monetary policy be decided by a committee, rather than the governor as lone decision maker. We don’t think either of these changes would be meaningful since the RBNZ already takes unemployment into account when it sets policy and the Governor has taken a more collaborative approach in deciding on rates over the past few years. AUD/NZD traded to a new cycle high of 1.1275, last seen in May 2016.”