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Analysts at Westpac  noted that The US Congress holds midterm elections on 6 November.

Key Quotes:

“The Republican party controls both houses. Democrats are hoping to break their grip on the levers of power. Markets should take an “as expected” outcome in their stride but midterms always produce surprises so markets and AUD could be whippy around the results.”

What are the midterms?

“The US holds midterm congressional elections on Tuesday 6 November. Midterm elections are held every four years, at the halfway point between presidential elections. All 435 seats in the House and 35 of 100 Senate seats face re-election. (House members serve two-year terms with the entire chamber facing re-election at the same time while Senators serve staggered six-year terms with 1/3 up for re-election every two years).”

What’s at stake?

“While midterms usually garner much less interest than presidential elections there has been a surge in voter turnout in primaries and special elections ahead of November elections.

Midterms are typically viewed as a referendum on the president and the current presidency is among the more divisive in an already deeply polarised electorate.

Republicans controls both houses. Trump’s ability govern over the next two years hinge on the midterms. Prospects for the Republican party in the House are thought to be decidedly weak with polls, fundraising, history and Trump’s low approval rating all pointing to heavy losses. However, the Senate looks much safer for Republicans.

Taking back one or both chambers would give Democrats a louder voice in setting the legislative agenda, though the President’s veto powers would constrain them from reversing his policies.

While much of Trump’s agenda for the economy has already been implemented the prospects for an extension of tax cuts, infrastructure and more deregulation hinge on the midterms.

Winning the House would give Democrats oversight power and authority to create “select committees”. A Democrat majority would likely pursue numerous controversies including Russian meddling and Trump’s personal finances. Impeachment risks are high under a Democrat led House, potentially unsettling markets, though the need for a two thirds majority in the Senate would thwart any serious attempt.”