The Fate of the US Dollar, the Dow, and Gold After US Midterms, US Inflation Data

Analyst Chat Talking Points:

• The US Dollar, US stocks, and gold prices have had a relatively tame response to the US midterm elections.
• The October US CPI report due on Thursday might be the more important event for financial markets this week.
• Live coverage of the October US inflation report begins on Thursday, November 10 at 8:15 EST/13:15 GMT.

Although the US midterm results aren’t finalized, it appears that gridlock is returning to Washington, D.C. With Republicans poised to take control of the House and potentially the Senate (contingent upon the runoff in Georgia), the prospect for additional fiscal stimulus over the next two years has been greatly diminished. But we still could see another US debt ceiling showdown culminating in a downgrade of the US credit rating a la 2011.

Overall, the US midterm elections had a modest impact on financial markets on Tuesday and Wednesday – the US Dollar rallied, gold prices slumped, and US stocks dropped back. The impact on the Federal Reserve’s plans may play out over the course of 2023, as a drop off in US fiscal stimulus weighs on the US growth trajectory, helping slow inflation.

Speaking of inflation, the next round of US inflation data are due out on Thursday. What does the October US inflation report mean for the US Dollar, US stocks, and gold prices? What about the December Federal Reserve rate decision? Chief Strategist John Kicklighter and Senior Strategist Christopher Vecchio, CFA discuss in this Wednesday’s DailyFX Analyst Chat.

--- Written by James Stanley and Christopher Vecchio, CFA, Senior Strategists