Markets digest Georgia results

We’re seeing caution on the US open on Wednesday, as the final votes are counted in Georgia and the Democrats head for an unlikely double win.

The victory means the Senate is split, handing an effective majority to the Democrats who now control all three chambers. While that doesn’t mean life will now be easy for incoming President Joe Biden, it will certainly be far less prohibitive and enable the party to deliver on more of their campaign promises, albeit not without disruption along the way.

Stock markets are holding up fairly well considering this was seen as the least desirable outcome, given Biden’s promises on tax and regulation, in particular, but a big old stimulus may sweeten the deal. The Nasdaq isn’t having its finest start to the year, which isn’t surprising, but under the grand scheme of things, it’s doing fine.

What was a little surprising earlier in the session was that, despite the US 10-year yield rising above 1% in anticipation of another sizeable spending package, the dollar continued to struggle and gold was holding its ground. Although that has since shifted, with the dollar now slightly higher on the day and gold off almost one percent.

All things considered, this week is shaping up to be a big win for the Democrats, bringing an end to an election they should have done even better in. There’ll likely be more drama as President Trump refuses to accept defeat, along with a surprising number of allies in the House and Senate, but that shouldn’t have a bearing on events two weeks from today.

Attention will likely remain firmly on the US this week, with the Fed minutes this evening the next point of interest. The central bank played the waiting game in December and will be very pleased that Congress eventually decided to assist with some of the heavy lifting, although I’m sure it will be hoping more help will soon be on the way. The situation in the country continues to deteriorate though so it may still be a matter of when, rather than if.

The jobs report on Friday will naturally be another key area of interest, although with a stimulus package passed before the end of the year, it may not quite pack the same punch. Less than 100,000 jobs are expected to have been added – although today’s ADP suggests that may be very optimistic – while the unemployment rate is expected to tick higher, something we should see more off in the coming months.

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.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam