FX.co ★ US Congressional Elections: The Battleground is in Georgia

So, in the United States of America, midterm elections were held, during which the Americans had to completely re-elect the House of Representatives, a third of the Senate, legislatures and governors in 36 states. The citizens of the United States almost coped with the task, and today it is possible to sum up certain results—at least preliminary ones.

Fact #1: The expected defeat of the Democrats did not happen. In the run-up to the election, the White House faced the bleak prospect of working for the next two years with an all-opposition Congress, both houses of which are controlled by Republicans. Many people called this scenario "basic." Indeed, with rare exceptions, the party to which the president who wins the election belongs loses the midterm elections to Congress. The only intrigue was how devastating a blow their opponents would inflict on the Democratic Party.

So, in hot pursuit, we can draw an unambiguous conclusion: the "red threat" (red is the traditional color of the Republicans) was exaggerated. Despite the fact that the Republican Party won the House of Representatives, in the American media its results in the elections are unequivocally assessed as a "defeat." Even the fact that the Republicans could theoretically take control of the upper house of Congress is not taken into account. However, the Democrats managed to avoid the "red wave."

In addition, the American press viewed recent events through the prism of Donald Trump's political ambitions, who could use the elections as a springboard to launch his election PR campaign with an eye to 2024. But, to the surprise of observers, his candidates, whom he openly supported and lobbied, lost. Not all, but many. Therefore, Trump's shares in the eyes of the American media have sharply declined, especially since a new Republican star has ascended to the political Olympus – Ron DeSantis (governor of Florida), who may become the main competitor of the former US president in the primaries–2024.

As for the gubernatorial elections, the result is also not in favor of the Republican Party: two gubernatorial seats passed from the Republicans to the Democrats. Overall, Democrats won 21 positions (an additional win in two states), and Republicans won 24 positions (respectively, they lost in two states).

Fact #2: The fate of the Senate will be decided in Georgia. There is definitely deja vu here: two years ago, the eyes of market participants were also riveted to the 10 millionth state in the southeastern United States, where local residents elected representatives to the upper house of Congress. In general, Georgia has always been considered one of the base states of the Republicans—representatives of the Democratic Party have not won there for decades. However, in 2020, the "continuity" was interrupted: the Democrat won, who decided the political fate of the Senate.

Today, Georgia can again play a key role in the elections. According to the American media (no official data yet), the Democrats now control 48 seats in the Senate, and the Republicans—49. The scales may tilt in one direction or another at the expense of three states—Arizona, Nevada and Georgia. In Arizona, the Democrat is likely to win, while things are more difficult with the other two states.

According to the latest data, in Nevada, the candidate from the Republican Party is in the lead by 18,000 votes. However, only 19% of the ballots were counted, so this overbalance is not decisive. If the Republicans win Nevada and the Democrats win Arizona, then the overall mandate score will be 50/49 in favor of the Reds. And then the fate of the Senate, as in 2020, will be decided in Georgia, where the second round will take place on December 6 since neither the republican nor the democratic candidate is now gaining the necessary votes to win here (50% + 1 vote).

At the same time, it is worth recalling that it is enough for the Democratic Party to take 50 seats out of 100, since US Vice President Kamala Harris (a representative of the Democratic Party) has the right to a decisive vote in case of equality of votes.

Thus, the upcoming "battle in Georgia" will have enormous political significance for both Republicans and Democrats. And if the former, in case of victory, will receive a kind of "ring of omnipotence" over the Congress, then the latter, in case of loss, will no longer be able to "bargain" with the White House internally, using leverage in the form of blocking bills.

In the context of the foreign exchange market, certain conclusions can also be drawn. Judging by the behavior of the American currency, traders played the election theme yesterday: the US dollar index crept up again, and the main pairs of the "major group" change their configuration accordingly. For example, buyers of EUR/USD finally abandoned the idea of a counteroffensive. Once again, the pair's bulls failed to gain a foothold above the parity level, although yesterday, they updated the local high at 1.0089.

All this suggests that the market is gradually switching to "classic" fundamental factors, leaving the topic of elections in the background, at least until December 6, when the notorious "decisive battle" in Georgia will take place.