US prepares for midterm Congressional Elections
Tuesday 8 November, 2022
Daily Currency UpdateIn the absence of any data the pound benefitted from rising stock markets yesterday, helping claw back some of the losses seen last week after Bank of England Governor, Andrew Bailey's dire assessment of the UK's economic outlook for the next couple of years.
After slumping below 1.12 post the BoE's policy decision, where Bailey warned of a recession that could last up to two years and unemployment may double, GBP/USD touched 1.15 overnight aided by some broad US dollar weakness seen in the markets. It’s another quiet day on the domestic front with a speech by Bank of England Chief Economist, Huw Pill, the only event of note. Commentary from him regarding potential interest rate hikes and the state of the UK economy could affect the pound’s value. GBP/USD is at around 1.1465 and GBP/EUR is at around 1.1480.
Key MoversThe Presidency of Joe Biden faces its biggest test so far with the Congressional midterm elections scheduled to take place later today. All of the seats in the House of Representatives are up for grabs as are around one third of seats in the Senate. The elections are generally seen as a test of the President’s popularity, and with inflation still close to 40 year highs leading to concerns for many households on how they can afford to pay their bills, it is expected that the Republican party will make gains, possibly taking control of both houses of Congress.
Should this come to fruition it could also lead to Donald Trump running for re-election in 2024 after he declared that he will be making a "very big announcement" next week. Whatever the outcome, the impact on the US dollar will likely be muted as the Federal Reserve is still signalling that it will continue with its interest rate hiking plans. Also concerns about the economic health of the Eurozone, especially if energy supplies become strained should we see a cold winter, mean the dollar will remain sought by investors due to its safe-haven status.
US growth rebounded in the third quarter according to recent data however if the Republicans take control of congress then it will make passing laws more difficult for Biden which could weigh on US economic performance as we head into 2024. EUR/USD has slipped back under parity to 0.9985.
- GBP/USD: 1.1375 - 1.1540 ▲
- GBP/EUR: 1.1405 - 1.1560 ▲
- GBP/AUD: 1.7610 - 1.7810 ▲
- EUR/USD: 0.9920 - 1.0040 ▲