Indeed, the next couple of years may be far more challenging for the Trump policy machine if the Democrats vote shows up.
I think the fear of the Blue wave is receding quickly, but nonetheless, we need to keep things in perspective in the sense this is only 2018 and not 2020. Markets, and traders especially, love to price in worse case scenarios and bring out history books to prove points; i.e., that a Democratic house is bad for equity markets. Okay, maybe so, but realistically I can't see how the Democrats would want to be perceived as killjoys and try to stifle any policy which is supporting the economy; why not just let the natural course of tax cut fade out then they can have a good argument.
While the first wave of dollar reaction could be little more than a knee-jerk response, some critical levels will need to be monitored, 1.1500 EURUSD and 113 USDJPY, as these could trigger a more profound correction.
But the market is singularly focused on two districts' votes now: Virginia 7 and Kentucky 6. And the USD is reacting to whichever way the decision goes. Right now, that's Republican lean, so strap in this is getting bumpy.
Flying under the radar *China Planning New Tax-cut Measures: Eco. Info Daily, details about the timing and the scope of the cuts remain sketchy. Regardless, the yuan bears are out in force as it is unlikely China will fall into Trump's good books regardless of the outcome of the election.
Gold markets continue to track the dollar in ping-pong styled fashion, which makes running any sizable risk a dangerous proposition at best until the election dust settles. But there's enough risk on the table to keep buyers entertained.
Oil prices remain weighted down by a more robust than expected API inventory build, and anticipated supplies from the Middle East. When factoring in more waivers, calls for more OPEC supply and the latest boisterous US supply forecasts, the path of least resistance does appear paved lower.