In view of Richard Franulovich, Head of FX Strategy at Westpac, Democrats’ advances in US Congress will likely thwart Trump’s agenda (tax cuts 2.0, deregulation), though infrastructure could see a bipartisan push. Expectations should be restrained though.
Key Quotes
“Trump and Democrats are very far apart, the latter preferring federal spending to drive capital works while the administration has pushed for private sector participation.”
“On balance, a divided Congress after the midterms eliminates some upside potential for the USD that would have come from additional fiscal stimulus and upward revisions to 2019 prospects. But we wouldn’t get too carried away: 2 and 10yr yield spreads continue to trend relentlessly in the USD’s favour to new historic wides even absent that. DXY offers value for longs into 95.00.”
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