By Justin McQueen

LONDON, Oct 9 - The New Zealand general election due November 7 is a key event risk for NZD, as polls point to a tight race. Labour has lost ground from its earlier poll lead and is now broadly neck-and-neck with the National party.

For NZD, the key issue is the RBNZ mandate. Labour has signalled it would bring back the dual mandate, reintroducing maximum sustainable employment objective, alongside price stability after the current government removed the employment objective in 2023.

With the unemployment rate at an 11-year high, a Labour victory would likely be initially viewed as dovish. Markets would naturally price a greater probability that the RBNZ would place more weight on labour market conditions, thus prompting an unwind in tightening expectations and therefore weighing on NZD.

Given this election-related policy uncertainty, AUD/NZD stands well-placed to continue performing in the lead up to the election, with the door open for a move towards fresh highs above 1.2500. A clear Labour win would reinforce that view, sparking an extension to the uptrend.
NZ unemployment rate


AUDNZD during elections

(Justin McQueen is a Reuters market analyst. (The views expressed are his own).)

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