A divided congress is likely US dollar negative
Nordea Research discusses the USD outlook in light of today's US mid-term elections.
"A hung congress would be a bad scenario for the USD, while you should expect EUR/USD to drop swiftly through the 1.13 level in case Trump and the Republicans manage to secure another 2 years with a Republican majority in both chambers.
Historically the USD has fared poorly both before and after mid-term elections which have resulted in a hung congress. while there is no significant USD-pattern around other mid-terms.
A hung congress on Tuesday will be bad news for the USD, given lower prospects of Trump-stimuli in a hung congress scenario. If we get a hung congress, then we should prepare for more a mix of aggressive trade rhetoric (due the president's widespread prerogatives on trade) and no further fiscal stimulus," Nordea argues.
As for stock markets, note that typically the third-year of a presidential election cycle is the best. You also see that the quarter after the midterms and the first quarter of the new year typically are good periods for stocks, but that's not always the case.
A weakening dollar and strong stock markets is a compelling post-vote thesis.
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