US Midterm Elections pan out as expected - Democrats take the House of Reps
The midterm elections in the US have resulted in a split Congress, with the latest results confirming the Democrats have taken control of the House of Representatives. This means that the US president will have a tougher time in passing legislation. On the face of it, we may see some pressure on US stocks later today, though the futures markets seem to be showing calm as equities again show a lack of concern over potential risks.
A fresh round of tax cuts are now likely to be difficult to pass through given the Democrats are worried about the deficit, so Trump's spending spree is now likely over - hence the risk to stocks.
This means that USD/JPY looks set to grind higher at best, though we note resistance into the upper 113.00's. Buyers are not giving up on better levels - and in this case yield - as the BoJ continues on its powerful easing measures despite accumulating yet more debt on its balance sheet.
Elsewhere, EUR/USD is trying to push up to the 1.1500 level, though this may be a case of position squaring to some degree. USD longs have been well established, so the lack of USD upside may well be a case of little fresh demand coming in - which may well (again) spell USD softness in the near term.
Cable is also pushing higher and now looks intent on testing 1.3200 higher up. Despite being in crunch talks to get a Brexit deal over the line, GBP is also grinding higher as a function of GBP short paring to a large degree with a fair degree of uncertainty still to consider.
All in all, it now comes down to the US data from here on out. If the numbers continue to impress then the USD will have fresh legs once we see a meaningful correction. Buyers seem to be coming in too early every time, and this means price action is very congested and tight.
Little in the way of data for today, so all eyes will be on the FOMC tomorrow night where many expect the Fed to prep the market for a hike in Dec.