Results of the elections to the US Congress are negative for the dollar

The results of the midterm elections to the US Congress create a situation of a divided parliament, in which Republicans retain control of the Senate and the Democrats get a majority in the House of Representatives.

The new balance of power creates significant difficulties for Trump in the development of tax reform. The probability of impeachment has decreased but the ceiling of restrictions for the US president will become more stringent. The trade war with China and a number of other countries is highly likely to resume actively since Trump is no longer limited by the need to respect party interests in the fight for votes. He will be supported by control over the Supreme Court.

Stock markets will be under pressure and continue to decline. The dollar will lose its risk of recession.

Eurozone

The composite PMI Markit index in October came out at the level of 53.1p, which turned out to be lower than the revised level of September 54.1p and confirms the findings of other studies on a gradual decrease in growth rates in the eurozone.

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Italy's economy began to decline, showing 49.3p, which is the 59-month minimum. The issue of forming the country's budget goes far beyond Italy and affects the situation in the eurozone as a whole.

Today, the report on retail sales for the month of September will be released. On Thursday, the European Commission will publish an updated summary of economic forecasts.

The EUR/USD pair reacted on Tuesday after the results of elections to Congress, and today, there is a chance to develop an upward trend and likely attempt to get to 1.15. The support will be at 1.1410.

Great Britain

The pound continues to attempt in developing an upward trend, which focuses on the increased likelihood of reaching an agreement on Brexit in November. As for macroeconomic indicators, the key day of the week will be Friday when several important reports on the state of the UK economy will be released at once.

In particular, it is expected that GDP growth will be 0.6% in Q3. This estimate coincides with the forecast of the Bank of England, which is also an estimate. But at the same time, it significantly increases due to temporary factors, rather than long-term ones. Therefore, the forecast for the fourth quarter once again drops to 0.3%.

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Nevertheless, in the short term, expectations are positive and support the pound. It is assumed that the trade balance deficit with the EU countries will decrease and reduce the fall in investment. On the other hand, the industry will show growth.

The GBP/USD pair was faced with resistance at 1.3120, however, the bulls will strive to go through it at the first attempt towards 1.3215 and further to 1.33. Conditions for growth remain favorable.

Oil

The price of Brent went below $ 72 per barrel, responding to a number of bearish factors. The entry into force of US trade restrictions against Iran was smoothed out by permission to continue purchases for 8 countries, provided that all financial transactions are controlled by the United States. This means that Iran will retain part of the official supply, while OPEC and Russia have increased production in preparation for restrictions. Hence, the offer is more than enough.

The API report on Tuesday showed an increase in oil reserves of 7.83 million barrels and petrol reserves grew. In general, the fundamental picture for oil is clearly not in favor of the bulls. The negative results of the elections to the US Congress are also added. Due to a number of signs, a recession in the United States became more likely in 2019, which would mean a decrease in energy consumption.

Brent is very close to the low of August at 70.41, where it will try to find support. A likely decline below 70 will mean an increase in a bearish sentiment.

The material has been provided by InstaForex Company - www.instaforex.com