Midterm elections in the USA: analyzing trading opportunities

Today, on November 6, midterm elections for Congress would be held in the USA. Recall, Congress consists of two chambers: the House of Representatives and the Senate. The current alignment of forces in Congress is on the Republican side (235 to 193 in the House of Representatives in favor of the Republicans and 51 to 49 in the Senate). That’s why Trump could afford trade wars as well as increasing the budget deficit and public debt to implement the tax reform.

Despite the fact that these elections only partially provide a rotation in the Congress, the changes can radically change a balance in Parliament instead. Note that the House of Representatives will be fully elected - all 435 seats, but the Senate - only a third (35 seats).

The main concern of the markets is the version of the election outcome, under which the Democrats will have full control over the Congress. And this means that Trump’s opportunities for further reforms, as well as trade wars, will sharply decrease. We would not say that this is definitely bad for the US economy as a whole, and for the dollar in particular. But such a scenario implies some short-term pressure on the dollar, due to the fact that the level of uncertainty will increase dramatically, the moments related to Trump’s election campaign investigations, as well as questions about Trump’s tax evasion, or even purely hypothetically, the specter of impeachment to Trump looms on the horizon. Full control over Congress, in fact, paralyzes any movement on the part of Trump, but on the other hand will not give him the opportunity to somehow degrade the current trend of events, for example, another trade wars. So, again, that’s not necessarily that it will be very bad for the US economy.
In total, despite the current apprehension of the markets, we do not see a substantial risk to the US economy even in such an extremely marginalized option for the current executive branch. So, the local weakness of the dollar can be used to buy it.

Regarding other options, the most likely one is the Democrat’s victory in the House of Representatives, maintaining the status quo in Senate will be kind of form of Trump’s defeat, but still won’t be a debacle.

The Republicans’ victory in the elections (considered as the least likely outcome) will almost certainly lead to a surge of optimism and the strengthening of the dollar buyers.

Well, we’re monitoring the outcome of elections and looking for points for the dollar purchases according to trading plans have been voiced earlier.