US midterm elections: Check the regional base elections

Chris L
Category:  Financial News
Today in the United States, four hundred and thirty-five seats in the House of Representatives, and 35 of the 100 Senate seats are in the ballot, what would happen in the market? May the US dollar rally be killed? Alternatively, will it push global markets up? Let's see it.

The United States is going to the polls today in its midterm elections. One of the most crucial elections in the last years as it would show how the American society really thinks about its president Donald Trump. The market is observing it as a Democratic win could push Republicans on the defensive against president Trump and his work with the trade war and Federal Reserve on sight.

Many experts are watching Congress elections closely but also important are the regional elections with almost all districts going to the polls, national, states, and counties. They are the real base of voters. If Republicans lose too many districts in state and region basis, it will add pressure on the presidency and how the party backs Trump.

However, if Republicans retain the majority of its seats in regional elections, it will give more time and stamina to Trump and Republicans as they will start believing they will change the odds no matter a defeat in the House of Representatives happens.

A win for Democrats will increase the risk of congressional investigations while a Republican sweep could make Congress to add more tax cuts and enact pro-growth measures.

Bank of America Merrill Lynch discards a blue wave in Congress, as they "think a split Congress is the most likely outcome but the probability of a 'blue wave' election in the House appears to have diminished." BoA believes a bipartisan Congress will support industrials and material sectors.

Goldman Sachs has a base case of Democrats taking control of the House while Republicans keep Senate by a small margin. This "implies slightly weaker fiscal stimulus and growth, as well as little reason to expect friendlier trade policy, which translates, in our view, to downside risk to Treasury yields."

According to Goldman, "implications for the Dollar appear more ambiguous..." However, a victory of Republicans in the House would mean a Dollar rally on election night. Finally, as equities and the Greenback have taken profit of Trump policies, a Democratic victory could push under pressure stocks and the US dollar when the new Congress will take place in January.

However, as author Ed Ponsi recently said in an article for FXStreet, "I’d be very skeptical of anyone who suggests any instrument will expand or contract under a particular political party. Such an argument is easy to make, but often doesn’t hold up under scrutiny. I’d be particularly skeptical of anyone who pushes such theories. Such opinions are not always based on facts. In fact, they are often based on the desire to push a certain viewpoint. I think we should always consider the source of an opinion; is this person trying to push an agenda? Unfortunately, the answer is often 'yes'."
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