Republican clean sweep could light up financial markets
Oct 28 (Reuters) -The control of Congress is key for the U.S. election and therefore markets which could be much altered by the possibility of a Republican clean sweep.
Whether this is interpreted positively or negatively, the potential that the Republican party could control the Senate and House of Representatives alongside Donald Trump as president, is cause to anticipate greater volatility.
While the battle for the next President is a close call, and control of the House even tighter, the Republicans have a slight edge and are clear favourites to control the Senate.
In 2016, following Donald Trump's win the dollar and U.S. equities took off on the back of another clean sweep, but while the S&P 500 had soared over 31% by January of 2018, the dollar had collapsed 13% in the same period.
This was largely due to pressure stemming from the trade dispute with China inspired by the President who also labelled the dollar too strong.
There is clearly cause to fear a similar fate for the dollar should Trump win again, but perhaps also a potential boon for stocks if the ability to pass budgets results from Republican control of both houses.
Ironically, a much less likely super majority that could fuel concerns about the U.S. debt pile, which might seriously hurt stocks, may actually boost the dollar which is the world reserve currency. Although highly unlikely, it is still a scenario to be considered.
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Jeremy Boulton is a Reuters market analyst. The views expressed are his own, editing by Ed Osmond
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