USD weakness to continue if Democrats take control of the Senate – TDS

FXStreet reports that according to economists at TD Securities, the USD could see further downside momentum should the Democrats flip both Georgia seats.

“Republicans need to win just one of the two GA contests on Tuesday to remain the majority party in the Senate, but polls have been moving in favor of the Democrats and betting odds have tightened. The Ossoff-Perdue race is expected to be the tighter of the two.”

“Should the Democrats succeed in flipping the Georgia Senate seats, we think the odds of another covid relief package will outweigh the downside associated with a potentially more ambitious Biden agenda. Taken in conjunction with the easing of notable tail risks (like Brexit), we think this would fuel the USD's downside momentum under the umbrella of reflation cemented by a higher inflation risk premium. We think this could further Asia FX outperformance versus the USD and corresponding equity markets.”

“Should the Senate remain in the hands of the GOP, we think the USD could find some limitation in terms of the weakness observed across the G10, particularly against EUR/USD.”