The New Zealand dollar inched up to $0.563 on Thursday, building on gains from the previous session as the US dollar weakened further following a decisive victory by Democrats in the US midterm elections. The outcome reduced fears of a contested result but heightened expectations of political gridlock in Washington, which could constrain President Donald Trump’s ability to advance his agenda, including plans for potential new military strikes against Iran.
The resulting slide in the US dollar more than offset downward pressure from weaker-than-expected domestic employment data, which led investors to pare back expectations of a Reserve Bank rate hike in December. Markets are now pricing in less than a 50% probability of a rate increase next month, down from about 75% earlier in the week.
Investor focus is now shifting to New Zealand’s general election on Saturday, with opinion polls pointing to a closely fought contest between the incumbent centre-right National-led coalition and opposition parties led by the centre-left Labour Party.
