Mitsubishi UFJ: A comprehensive victory for the Democratic Party may lead to a fiscal deadlock, which is bearish for the US dollar and US Treasury yields

1. As the Democratic Party leads in the preliminary results of the US midterm elections, the US dollar index has weakened to a one-month low. Many prediction markets believe that the most likely outcome is for the Democrats to gain control of both the House of Representatives and the Senate. 2. Lin Li from Mitsubishi UFJ stated in a report that a comprehensive victory for the Democrats could lead to fiscal deadlock and reduce market expectations for further US fiscal expansion, thereby weighing on US Treasury yields and the dollar. 3. Lin Li added that this situation is favorable for Asian currencies, but the impact may be limited since tariffs and trade policy are still mainly controlled by the President and the executive branch.