TD Securities’ Jayati Bharadwaj expects a divided Congress to keep macro fundamentals as the main driver for FX, maintaining a modestly bearish view on the Dollar into year-end. The bank argues fiscal gridlock should narrow U.S.-RoW growth and rate differentials while supporting institutional credibility. A Democratic sweep is seen as initially USD-positive, whereas continued GOP control is viewed as the most USD-negative outcome.
Gridlock keeps macro in control
“We expect a divided Congress, leaving macro fundamentals as the primary driver of FX and supporting our modestly bearish USD view into year-end.”
“Modestly bearish to neutral USD. Fiscal gridlock reduces the scope for further fiscal stimulus and points to narrower U.S.-RoW growth and rate differentials, but improved fiscal discipline and institutional credibility should limit USD downside.”
“Divided government should modestly…
