Elections in the US should not play a major role for the US Dollar – Commerzbank

The US Congressional elections are coming up. Will the outcome be relevant for USD exchange rates? Strategists at Commerzbank do not think so.

Midterms not a major event for the FX market

“Four arguments suggest that currency traders are unlikely to make a significant reassessment of the USD if the Democrats lose the majority in one of the two chambers). 1. Losing the majority in the House will not change Biden’s political room for maneuver too much. 2. The fiscal room for maneuver is currently so limited that no new fiscal ‘bazookas’ could be expected anyway. 3. The recession expected by many in the US would be induced more by the Fed's monetary policy than by the budgetary policy of Congress. 4. On other FX-relevant issues (such as trade policy), the differences between Democrats and Republicans are currently rather small.”

“One can certainly draw conclusions from the election outcome that could be relevant for USD rates in the long run, such as what they say about the likely outcome of the presidential election in 2024. But honestly, we will get a lot more relevant information about that in the next two years. There is no reason for the forex market to bet on it already.”