Analysts at TD Securities point out that based on polling results as of the time of publishing, Republicans pick up a few seats in the Senate while Democrats gain a small majority in the House and this outcome is largely in line with pre-midterm election polls.
Key Quotes
“We see relatively limited scope for cooperation between the two parties, with no significant additional fiscal stimulus and no fundamental change in trade policy.”
“Democrats are likely to use subpoena powers in the House to disrupt the White House, and may at least explore impeachment proceedings.”
“FX: A fairly underwhelming reaction in FX markets. However, we see a slow burn story evolving for FX, one that sees valuation and positioning risks magnified in the weeks ahead.
The USD looks vulnerable on these measues as fiscal initiatives are likely to fall by the wayside as markets question the sustainability of US assets outperforming the rest of the world. This should come to the benefit of EUR and JPY.”
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