US midterm elections goes as expected, no real surprises
The House has been won by the Democrats and Republicans retain the Senate. It's a case of Democrats doing just enough to secure the expected result but not enough to warrant any overwhelming fear or uncertainty ahead of the 2020 elections.
With Democrats securing the House, the dollar is on the back foot as markets are still digesting what would the result mean. On the front of it, Republicans losing out is a negative as it adds uncertainty towards the elections in two years.
But taken into context, the president's party losing seats isn't anything new when compared to historical midterm election results. And looking as to what changes, the immediate thing that springs to mind is Congressional gridlock on stuff like immigration and the budget - and of course less push for tax cuts.
However, the fiscal responsibility - tax cuts aside - is unlikely to shift all too much and when it comes to trade, especially with China, essentially nothing is going to change. We're still going to be seeing a lot more of the dispute between US and China on trade and other matters, and markets should know that by now.
What this means is that yes, there is reason for a temporary setback in the dollar. But nothing is going to change when it comes to the Fed as well, and that will give reason for yields to climb higher as fiscal changes - for the better - are likely to be kept at a minimum and in turn will also help underpin the dollar in due time.
The dollar is limping now but we're not seeing any major breakdown in technical levels. So, don't count the dollar bull out just yet.
