Risk trades are higher after Democrats regained control of the House in a vote that tracked close to what polls were expecting. Kiwi is the highest performer after a solid jobs reports ahead of the RBNZ decision. EURUSD is attempting to close the day above 1.1440 to make it above the Sep 24 trendline resistance. The DOW30 was stopped out and the EURUSD long was closed for 145 pip-gain.

There was no major surprise in the US midterms. Democrats won a dozen-seat majority in the House which is slightly less than forecast. Republicans did better in the Senate, expanding their majority and winning a pair of very tight races. Overall, Republicans did a bit better than expected but there were no surprises and the balance of power has tilted back towards gridlock.

So what’s behind the surge in indices? As we wrote before the vote, elections are by definition uncertain events and increasingly emotional events. Almost any result would have led to a sigh of relief to some extent. This means that further tax cuts are less likely in the US but it’s also a check on the President’s trade war and some of his darker impulses. The S&P 500 opened 21 points higher and is now up 42 pts. DOW30 is up 358 pts, above its 55-DMA for the 1st time since Oct 10.

- advertisement -

Looking ahead the RBNZ is largely expected to leave rates at 1.75% .The currency jumped after the unemployment rate dropped to 3.9% from 4.5% earlier today. That’s the lowest in 10 years and could be a game changer for the central bank. The drop in unemployment came despite a 0.2 pp rise in participation. Wages also jumped 1.4% q/q compared to 0.8% expected.

Before the report, the RBNZ was expected to remain on the sidelines for at least a year with the chance of a cut but these numbers mean a hike is now more likely. NZD/USD has rebounded nicely from a test of the 2015/16 lows in the past six weeks but is still 500 pips below April levels. A shift from the RBNZ and continued USD selling could help to close that gap.

Previous articleEco Data 11/8/18
Next articleAs The Election Dust Settles
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.