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Uncertainties from weekend elections in Germany and New Zealand weighed on Kiwi and the euro. Meanwhile, markets expect Japan PM Shinzo Abe to call for a snap election.

  • Japan’s flash manufacturing PMI pops up from 52.2 to 52.6 vs. 53.4 expected
  • Germany’s election results cause weekend gaps for the euro
  • Shinzo Abe Expected to Call for 2T JPY Stimulus and Snap Elections

Major Events/Reports:

Weekend elections weigh on EUR and NZD

Both Kiwi and the euro started the week on a week note after elections in Germany and New Zealand inspired a bit of uncertainty.

As expected, Angela Merkel and her party are set to take the biggest chunk of the Germans’ votes, with 246 seats (34.7%) while Martin Schulz’ Social Democratic Party is slated to get 153 seats (21.6%).

But in a plot twist that’s worthy of a House of Cards episode, the AfD – also known as “alternative for Germany” and represent alt-Right sentiments – are set to snag 94 seats (13.3%), which is about twice or thrice more than what markets had expected.

Merkel is confident that she and her team will be able to form a coalition “by Christmas.” Still, the unexpected support the AfD, which has been vocal against Merkel’s policies, got was an unwelcome surprise for risk-averse market players.

Elections in New Zealand wasn’t as clear cut. See, though Bill English’s National Party got tons of votes at 58 seats (46%), Labour leader Jacinda Ardern hasn’t thrown in the towel yet, and said that they’d rather wait until results from the special elections – which tallies overseas and early votes – are printed on October 7. More importantly, Ardern is sounding a lot like she wants to form a coalition government with NZ First’s 9 seats (7.5%) and Green Party’s 7 seats (5.9%) herself.

Not surprisingly, the uncertainty surrounding New Zealand’s leadership kept forex bulls away from the Kiwi.

Major Market Mover(s):

NZD

The New Zealand dollar woke up to weakness earlier today thanks to uncertainty in New Zealand’s political scene. Of course, it also didn’t help that Fonterra has kept its milk price forecasts for 2017/18.

NZD/USD is down by 47 pips (-0.64%), NZD/JPY is down by 49 pips (-0.60%), and AUD/NZD is up by 72 pips (+0.66%).

Watch Out For:

  • 8:00 am GMT: Germany’s IfO business climate (116.0 expected, 115.9 previous)
  • 9:30 am GMT: BOE’s quarterly Financial Policy Committee statement