U.S. Trump administration likely to face rising Republican pressure for more cautious policies ahead of 2010 Presidential Election, says Scotiabank

The United States’ Trump administration is expected to face increasing pressure from the Republicans to pursue more cautious economic and trade policies in preparation for the US Presidential Election of 2020, according to the latest research report from Scotiabank.

Democrats have regained control of the House of Representatives in the US midterm elections, while Republicans expanded their majority in the Senate. It will enable the Democratic Party to block much of President Donald Trump’s agenda and launch a series of investigations into the Trump administration.

In general, a split US Congress itself is expected to undermine the dollar broadly. Democrats winning back the House will dim chances for major stimulus initiative, eliminate the potential for more tax cuts and lower the nation’s future debt deficit, the report added.

It could drag down US economic growth and reduce upside room for the UST yields going forward, supportive of risk-on sentiment and prop up EM Asian currencies afterwards. A House flip on Tuesday is not necessarily good for the US-China trade dispute that has gained a bipartisan support.

"We stay vigilant, while expecting the US and China to deescalate their trade tensions to some extent at the Trump-Xi Summit set for November 30 - December 1," the report commented.