US: Focus shifting on Mid-Term elections - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital, points out that Trump is still polling net negative ratings of approval and the betting market prices the odds of Democrats taking control of the House of Representatives at around 67% compared to 35% for the Republicans. 

Key Quotes

“The spread in these odds has narrowed modestly in the last month, and it is not so large to suggest the Democrats have it in the bag.”

“Nevertheless, the odds favour Democrats taking control of the House.  This might be expected to contribute to deadlock on new legislation, and may raise legal pressure on Trump related to the Mueller investigation revelations.  Trump might be expected to fight back by latching onto populist issues that divide the nation and weaken confidence in Congress to deal with domestic policy challenges.”

“It is somewhat encouraging for stability in US government that the Republicans are expected to retain control of the Senate by 86% to 15%.   This might help avert severe policy battles between Congress and the Administration.”

“If the Democrats take control of the House, and Congress is split, the market reaction may be muted,  but it might help prevent the USD from rising further and ensure it retains a higher risk premium.”