Why the US midterm vote sent both the dollar and oil lower
NEW YORK — The US dollar weakened and oil prices fell sharply on Wednesday after Democrats won control of both chambers of Congress. Currency traders saw less reason to hold dollars for safety once the scale of the Republican defeat eased fears of a contested result. Oil traders drew a different conclusion from the same vote: President Donald Trump now faced greater political pressure to end the war with Iran.
A clear result eases demand for dollars
Investors went into Tuesday’s election uncertain about who would control Congress and whether the outcome would be challenged. Democratic gains in Republican strongholds settled the balance of power across both the House and Senate. US shares rose as investors became more willing to take risks, easing demand for the dollar. It is reported that the dollar index, which measures the currency against a basket of its peers, fell 0.32% to 101.51. The euro gained 0.38% to $1.1236.
Oil traders weigh the political cost of the Iran war
The link between the vote and oil ran through the price of petrol. Trump acknowledged that higher fuel costs during the war had hurt Republicans at the polls, even as he defended the decision to attack Iran. Reports of progress in talks between Washington and Tehran had already pushed crude prices lower before election day. The Republican losses strengthened traders’ expectations that the White House would face more pressure to reach an agreement.
Oil prices swung as traders weighed that prospect. Brent traded above $104 a barrel early on Wednesday. By 6.58pm South African time, it was at $94.29, down $9.27, or 8.9%, from the previous settlement. US benchmark West Texas Intermediate fell 7.8% to $88.54. The currency market already knew who would control Congress. The oil market was still trading on an expectation about Trump’s next decision, and he had left open the possibility of renewed military action.
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