AUD and NZD rebound from lows as New Zealand's cabinet formation outlook remains uncertain

1. On Monday, the Australian dollar and New Zealand dollar rebounded from last week's sharp declines. Previously, global stock markets had plummeted and expectations of US interest rate hikes drove the dollar higher, pushing these two currencies to multi-month lows. The Australian dollar rose 0.45% against the US dollar to 0.6892, after dropping 2.5% last week and touching a seven-month low of 0.6855; the New Zealand dollar rose 1.06% against the US dollar to 0.5600, after a 1.5% decline last week and a 16-month low of 0.5529.2. US employment data released last Friday exceeded expectations, and hawkish comments from Federal Reserve officials brought the probability of a December rate hike up to 81%, resulting in the dollar’s largest gain in nearly five months. This pressured the Australian and New Zealand currencies last week.3. Preliminary results from New Zealand's election show that the current center-right coalition led by Prime Minister Luxon still maintains a slight majority, but the outcome remains uncertain, with official results to be announced on November 27. Josh Williamson, chief economist for Australia at Citi, believes there is a 55% chance for the center-right government to remain in power, as New Zealand voters typically do not remove a government after only one term. If the coalition continues to govern, the Reserve Bank of New Zealand is expected to maintain its sole focus on inflation, while fiscal spending could decrease, the public sector could shrink, and the KiwiSaver pension scheme might expand—factors that should support the New Zealand dollar and bonds.4. In Australia, Reserve Bank of Australia Assistant Governor Hunter stated that there is currently no sufficient evidence to show AI has significantly boosted productivity or caused large-scale unemployment, but she warned the technology could increase financial stability risks. Reserve Bank Board member Baker will give a speech on Thursday; last week, the Reserve Bank decided by a vote of 6 to 3 to raise rates for the fifth time this year, but removed the statement that it would "raise the overnight rate further if necessary." The market will be watching to see whether Baker was one of the three dovish members.