Short NZD/USD (From 19-Oct to 3-Nov)
Real-Time AmpGFX – bought AUD and NZD to close shorts
Bought half unit of AUD/USD at 0.7690
Bought half unit of NZD/USD at 0.6945
Closed after the payrolls report.
Real-Time AmpGFX – sold NZD/USD (Thu 10/19/2017 1:36 PM)
Sold half unit NZD/USD
Comment
The market should not be overly surprised that a Labor/NZ First/Green government has been the result. So the deep fall in the NZD on this outcome seems a bit excessive.
However, the decision may bring more focus on the housing and immigration policies. Both Ardern and Peters made it clear there is strong agreement on these plans. This includes ending negative gearing, a ban on foreign investment in existing residential property and tougher criteria for work and student visas.
Their policies, in general, are designed to discourage foreign investment, and we might expect this to undermine the housing market further and weaken economic confidence.
Peters himself painted a dire outlook in his press conference, saying he essentially expects a significant economic downturn and it won’t be his fault. He spoke of weakening confidence across all sectors in the economy. While this might seem exaggerated against the recent trends in economic reports, the directional shift is apparent, and his words may discourage domestic economic confidence.
The market has made a habit in recent years of reacting belatedly to key developments. We have been bearish on NZD for some time and see it as over-valued. Perhaps the change in government will be a catalyst for a sustained trend change.
We remain more positive for the USD, even though we have been forced to cut half of our recent short positions in CAD and EUR.
Positions
Long half unit USD/CAD at 1.2485; s/l 1.2393; t/p 1.2660
Short half unit EUR/USD at 1.1798; s/l 1.1923; t/p 1.1525
Short half unit NZD/USD at 0.7009; s/l 0.7123; t/p 0.6680