CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Republicans 8217 sweep of Congress recalls 1995 dollar secular bull

Article By: ,  Financial Analyst

Less than 24 hours after we noted that Friday’s US jobs report may not matter for the US dollar, the USD index broke out to fresh four-year highs, with another perfect-storm of a day, with positive data in the US and further downside surprise figures from the Eurozone, UK and Japan, as well as a historic Republican sweep of US Congress.

The contrasting data showing came in the form of disappointing UK and Eurozone PMI series (17-month lows in UK services PMI and nine-month lows in German services PMI), while Oct ADP rose to 229k—the seventh straight figure above 200k, and the November services ISM employment sub-index hit a fresh nine-year high at 59.6).

The US Republican party’s sweeping victory in both the Senate and House of Representatives in the mid-term elections also helped power up the US currency, as the market-friendly party retains control of both chambers for the first time since 2007.

Seven-year dollar rally began in 1995 when Republican swept Congress during Democrat president

There is no definite relationship between the performance of the US dollar and the division of partisan power in Congress, but it is worth mentioning that the last major secular rally in the US currency kicked off after the 1995 midterm elections, when Republicans took control of both chambers (led by Gingrich) in a Democrat-led White House (Clinton). The Republican-dominated Congress forced Clinton to adopt more market-friendly policies, helped by an emerging budget surplus, accelerating global flows into US equity and capital markets. This was followed by the “strong dollar” policy adopted by Secretaries Rubin, Summers and O’Neil, which extended the bull market from 1996 to 2002.

Today, the economic environment is glaringly different from the mid- 1990′s, but this does not overlook the similarity of the contrast between the then prevailing relative growth rates between the US and rest of the world (Germany’s post-unification struggle and Japan’s zero-bound policy). More importantly, the Federal Reserve is the only major central bank to have taken concrete (and preliminary) steps in ending a period of multi-year policy easing. This should re-affirm the trend cyclicality of the USD Index, highlighted by an average duration of nine-years for downcycles and upcycles lasting six years.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024