USD starts the day weaker following Alabama Senate Election
The main talking point overnight on GBPUSD was the effect that the highly controversial senate election in Alabama could potentially have on the Trump administration.
The Republicans haven’t lost a seat in Alabama for nearly 25 years. In fact, it was one of Donald Trump’s key states in the 2016 Presidential election, Trump received major support from Roy Moore. Mr Moore has been defeated by Democrat Doug Jones, following a series of sexual misconduct charges and racial abuse claims which he denies. This is likely to cause a serious tsunami in US politics.
The Senate is now reduced to 51/49 in the republican/democrat balance which means that under the Trump administration, the series of tax cuts aimed at businesses and the wealthy in order to generate economic growth are looking less likely.
The DOW Jones recently posted its best ever day on news that the Trump administration was likely to be pushed through, showing the potential benefits these cuts could bring to US businesses. The news in the Senate has weakened the Dollar and could cause further weakness should a shutdown occur in Washington, in the event that President Donald Trump fails to push it through.
Inflation in America is a concern
US inflation slowed last month, with weak healthcare cost and the biggest drop in clothes prices since 1998. This is likely to draw the attention of the Federal Reserve members tonight when they meet to discuss the anticipated interest rate decision in the US. An increase to the current interest rate is expected by the markets and seems to have been priced into USD exchange rates already.
I personally think this will do little to affect the Fed’s decision later this evening, however investors hoping for a bullish statement on what to expect next year might be left disappointed, as the expectation for three hikes in 2018 may be a little optimistic.