NZD has already been under some pressure since the 25th of September when the markets opened with a gap lower on the day after elections.
During the European morning today, NZD/USD touched 5-day lows around 0.7801. News about the new government triggered NZD selloff driving the currency to May,26 lows near 0.7014, and the pair lost almost a figure for the day.
Why did Kiwi bulls give a hostile reception to the new government? First, uncertainty. The Labor party leader untested, and there is no understanding if it’s good or bad for economy. Second, recent comments of Peters again reminded of the overvalued kiwi, and made the market await for more dovish stance on the RBNZ.
AUD/NZD played its cards right and grew to the 1.1215 area. Some Aussie-positive news may push the pair through key resistance at 1.1300 last seen in 2013.
What we saw today was just the tip of the iceberg. The aftermath of this coalition seems to have more long-term impact on NZD.