We could be looking at a pivotal week for dollar exchange rates, as investors begin to assess their positions ahead of the mid term congressional elections next Tuesday.
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Since his victorious campaign 2 years ago, Trump has been able to follow through on a number of his promises by leveraging the republican’s control over both the House of representatives and the Senate.
This power could come into question next week however, as a loss of seats in either of the above could hinder not only the Trump administration’s ability to push on with their ambitious legislative changes, but also weaken the President’s hand in international trade talks moving forward.
Importantly for the dollar, the markets may view this as a popularity vote for the President’s 2-year tenure. A heavy loss of seats could potentially reflect a severe lack of confidence, which could lead to the dollar falling out of favour with the markets in the long run.
On the face of things, there is more scope for a “blue wave” of democrats to gain ground in the House of Representatives, with all 435 seats up for election and number of Republicans close to retirement.
Personally, I feel that the slight unease the markets could be feeling from this uncertainty might already be priced into the market, offering dollar buyers with a potential opportunity to limit their exposure. If Republicans once again come out with full control on both fronts I think a move back below the 1.25 mark on cable rates could potentially be on the cards.
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