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Georgia Elections Preview: Dual Democratic win to boost markets in expectation of more stimulus

The special Georgia runoffs are critical for the Senate and for stimulus amid the increase in coronavirus cases. In the opinion of FXStreet’s Analyst Yohay Elam, markets will cheer a clear Democratic victory and fall if Republicans hold the upper chamber. A protracted event has high chances and would initially cause a downfall. 

See – USD weakness to continue if Democrats take control of the Senate – TDS

Key quotes

“Around 90% of the votes will probably be counted after several hours and for Dems to win, Warnock must surge to a clear victory against Loeffler in a race that is seen as an easier win for Dems. If Warnock is quickly declared winner, the focus is set to shift to the Perdue-Ossof runoff. Even if Ossof is marginally trailing behind Perdue, investors would likely expect the remaining votes to change the picture in favor of Democrats. In this case, markets are set to rise and the safe-haven dollar is due for a fall during the Asian session or the early European one.”

“If voters opt for Perdue – the only person that previously won an election – it is over for Democrats, even if Warnock enters the Senate. In case of an early Perdue lead over Ossof, markets will likely tune out of the Loeffler-Warnock race, sending stocks lower and the greenback higher. While Biden may still work with Senate Majority Leader Mitch McConnell on further support, it is set to be a tricky road. Markets may refocus their hopes on the Federal Reserve, but the instant reaction will likely be negative.”

“Perhaps the most likely scenario for this Tuesday night is a repeat of another Tuesday night – the general elections on November 3. If the races are too close to call, it will likely take several days if not a week or two to sort out the winners. In this scenario, Republicans retain control of the Senate at least until the victors are sworn in. Such a delay could diminish the chances of a generous stimulus bill – even if Dems eventually win control. Markets may react with a downfall unless the picture clears.”

 

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