Reaction to the election.

Well the dollar moved down throughout the asian and european session leading into the voting. The popular beleif is that Democrats are expected to gain control of the house and the senate. At this point I am assuming that the market is saying that democrating control is dollar negative.

I forgot where I heard this; I heard that Democrats are "anti big business" while republicans are "big business friendly"....

no wonder democrats are winning.. they must be "little people friendly"

I think that is pretty much universally accepted analogy.

From Wachovia:

We briefly mentioned today's midterm elections in yesterday's report, and we wish to expand on that theme today. As we wrote yesterday, the most bearish scenario for the dollar would be a big night for Democrats (i.e., not only do Democrats gain a majority in the House but they also take the Senate). Conversely, Republicans retaining control of both houses of Congress would be the most bullish scenario for the greenback. Because of their ties to labor, Democrats are seen by many market participants as favoring a weaker dollar that would help to spur exports and constrain imports. (This perceived bias conveniently ignores the fact that the "strong dollar policy" was coined by Robert Rubin, who served as Treasury Secretary under President Clinton.)
In our view, however, any effect on the dollar from the elections will be very short lived. Dollar policy is the domain of the U.S. Treasury Department, and Secretary Paulson is not going anywhere regardless of which party control Congress. Moreover, U.S. economic policy will not change significantly over the next two years. With President Bush still in the White House, the probability of tax hikes is quite low. The bottom line is that the election will have little effect on the U.S. economic outlook and, consequently, should have few implications for dollar exchange rates. Although the greenback could react once the election results start to print, the effects should be rather short lived.

I would think there's a good chance the $ will gainback some of it's loses today no matter what happens-but if the republicans retain control of congress (or even just the senate) we could really see a good amount of today's action retrace...

While Wachovia's analogy makes perfect sense, I think if the Republicans somehow pull of a big surprise the dollar will rally beyond what they may consider rational.

I wonder if the republicans are doing well, the dollar is rallying strongly today are the weakness in the european, japamese and early US session?

While the description fits the typical stereotypes, I think the keyword here for the dollar is harmony.

The dollar perfers Harmony (meaning a political majority). This has been true in the case when the house, senate and presidency were squarely in the hands of republicans OR democrats.

Because it would seem that democrats will at least take the house, this creates a tougher atmosphere for pushing through policy, and therefore creates the illusion that things will pretty much stay the same (from a policy stand-point).

If the republicans would retain control of both the house and the senate, then there is a perception that there would be a little more attention on inflation and monetary policy which is seen as positive for the dollar.

Personally, I think this is why you are seeing dollar weakness (the democrats look to take control of at least the house).

I agree with wachos analysis there...

Damnit - I'm short GBP/USD... I knew I should have voted Republican!

According to CNN, it appears to me that Republicans may end with a clear win at the Senate (needing only 8 votes to bag majority)..

Lower house is still up for grabs though.

it seems like from dailyfx.com if we have a mixed house/senate then it will weaken the dollar. what are others thoughts on this? when will we know the final tally? I am sure we will see it on the charts when it hits. thoughts?

Democrats is gaining some grounds... 3 more "pickups" needed and they control the upper house!

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Its now R44 vs D43 at the senate.

As the election outcome is not going to have any affect on interest rates it's not going to have any affect on the dollar (except maybe very temporary). I remember last year dailyfx saying that Kozumi's landslide win would help the yen, but it just turned out to be the start of the yen's long decline against the dollar.

I think you hit the nail on the head there...

I see that democrates has a good chance to control one, although it seems that both of them, democrates and republic has the same chances.

I'm looking forward to democrates winning votes, and as you guys said, dollar negative...

i agree dollar nigative

Most interesting watching Senator George Allen (R., VA) giving his good night speech. He's the son of former Washington Redskins coach George Allen (an avid consumer of milk). The Allen senatorial race is too close to call. Allen's opposition is ahead by approximately 2300 votes. By sunrise, that will probably change to 23,000 votes!!!! But seriously there are 200,000 absentee ballots to count. Could take a while.

BTW, I agree with Wacho to a point...the election will have short term visible effects on the dollar. But when it's all over six months from now, when you least expect it, then you'll slowly but surely see the oh so subtle impact on not just interest rates but most all else with a dollar nexus.

Politics...the wrist the moves the invisible hand.

IIRC, CurrencyTrader had an article showing that it was the opposite. During Democratic presidencies the dollar went much stronger than during Republican.

Absolutely. It was a product of the economic condition during that time. As with alot of discussion on the FF we often fail to state rather we are talking about immediate reaction or long term effects. I started this thread with the intention of talking about short term reaction which I failed to state.

What I was refering to and others had commented on was the general beleif by business in general that the republicans would create a more business friendly environment. Which yet again in the end may have or may not have been possitive fore the dollar in actuality. However that does not stop speculators from buying the dollar based on the general idea.

In actuality we still have spent alot of money and the trend of increasing trade deficit has continued. In the past when we spend all of our existing money we just print more. Assuming that our m.o. is not going to change anytime soon, I believe we will see dollar weakening become prominent during or at the end of the first quarter.

another point of interest on the same topic is that gold is down 8 dollars already this a.m.