FX.co ★ Democratic Congress to curb Trump’s agenda and fiscal stimulus

The Democrats’ decisive victory in the US midterms and their takeover of both chambers of Congress triggered a marked repricing of risk across global markets: the US dollar and stock indices moved lower while US Treasuries gained ground. Bloomberg reports that the scale of the “blue wave” surprised investors: Democrats picked up at least six Senate seats and retook the House of Representatives, winning even in traditionally conservative districts. President Donald Trump has already confirmed he accepts the election results, The New York Times reports.

The main driver of optimism in the debt market was the expectation of political gridlock in Washington. A split between the White House and Capitol Hill will make it much harder to pass large fiscal stimulus packages, new tax cuts, or unchecked spending increases at a time when US public debt is near a record $40 trillion. Reduced Treasury borrowing needs pushed yields down across the curve: the five‑year yield fell nine basis points to 4.68%, and the 10‑year declined two basis points to 4.94%.

For the tech sector, the Democratic win raises the risk of tougher oversight: market participants fear barriers on AI‑related projects and restrictions on new data‑center construction. Against this backdrop, the US dollar weakened versus all G10 currencies — most versus the Swiss franc (‑0.5%), and also versus the yen and the euro (‑0.4%). The MSCI Asia Pacific index dipped 0.2%; South Korea’s Kospi ended a highly volatile session with intraday swings of more than 7%. Gold, boosted by geopolitical uncertainty, rose 2% to $4,007.6/oz, and WTI crude added 0.3% to $96.41/bbl.