No Blue Tsunami

No Blue Tsunami

The threat of the Blue Tsunami has officially receded as the GOP will hold the Senate, but none the less we need to keep things in perspective in a sense this is only 2018 and not 2020 so time to curb one’s expectations.

Volumes have been high, and equities remain supported suggesting this outcome is positive for risk since the gridlock outcome ultimately will support the president’s current mandate.

The question is where the dollar will settle as the focus remains squarely on both EURUSD and USDJPY.

Traders especially love to price in worse case scenarios and bring out history books to prove points. i.e. that a Democratic house is bad for equity markets. OK maybe so but realistically I can’t see how the Democrats would want to be perceived as Killjoys and try to stifle any policy which is supporting the economy. Why not just let the natural course of tax cut fade out, if it does in 2019, and then the Democrats can have a good argument to counter what appears to be a very market friendly Republican policy.

In Asia

The problem for Asia is that President Trump is unlikely to give China a free pass, despite the fact he said he would tone down post-election, I don’t believe one word of that claim.

China will be on Trumps ” naughty ” list and after all is said and done on the election front, we will pivot quickly to US-China relations.

So, we will be back to a very muddled outlook for Asia.

However, positioning is flat, so I’m not expecting any significant fireworks in Asia until we get the next escalation or de-escalation of US-China Trade risk.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes