The US midterm elections take place today, and there has been a heightened level of scrutiny on this year’s results as they represent the first chance for US voters to give their assessment on the current Trump administration’s performance.
Regardless of your views regarding President Trump, UK businesses have a vested interest in the US midterm elections results due to the importance of US/UK trade following Brexit in 2019.
Hamish Muress, currency expert at international payments company, OFX has shared some insights as to what may happen:
“As we approach the final countdown to the US midterm elections tomorrow, speculation abounds as to what the results will show. Early voter turnout is unusually high, there have been frenzied rallies on both sides, and President Trump’s approval ratings are at a low of 44%.
Opinion polls continue to support the view that the Senate will be held by the Republicans, whilst the House of Representatives will be seized by the Democrats. Under such a scenario, the Democrats would be able to significantly hamper President Trump’s ability to push through the radical policy programmes promised in his campaign speeches. However, as this is the pollsters’ predicted outcome, any immediate impact on the dollar’s performance would be negligible.
Beyond 2018 though, the Democrats could be expected to rein in Donald Trump’s fiscal spending plan, which could have more of an effect on the dollar. There could also be a real risk of government shutdowns, which again would have a negative impact on the dollar.
Should the Democrats secure both the House and the Senate – a tall order – a tumultuous few months would likely follow. Impeachment proceedings linked to Russian interference into the 2016 elections could only realistically happen in this scenario, and with dramatic effect on the markets. Uncertainty in this period would weigh on both economic growth and the Federal Reserve’s interest rate decisions. Fiscal spending could be tapered, exacerbating any downward effect on the dollar.
UK businesses should take note of the different scenarios that could play out in the US midterms, as they are likely to affect the dollar’s performance against the pound, as well as any prospects for a future UK-US trade deal. The biggest risk to UK businesses during the midterms would be if we were to see a scenario or outcome that isn’t anticipated by any of the analysts or pollsters. If this were to occur, we would certainly see a lot of currency volatility, with an immediate knock-on effect for UK-US trade.”
– Hamish Muress, Currency Expert, OFX
