Markets across the globe recorded positive performance yesterday following the outcome of the US midterm elections, which led to a divided Congress, but concerns this would cause political gridlock in Washington weighed on the US dollar.
The results of the US midterm election came in as predicted by pollsters, with the Democrats winning the House of Representatives and the GOP strengthening its majority in the Senate.
Despite fears that political gridlock could stifle President Donald Trump's pro-market agenda, analysts do not expect a reversal of cornerstone policies like tax cuts and financial deregulation measures, which have already been enacted.
Meanwhile, many commentators expect the stronger influence of the Democrats to help push through increased infrastructure spending.
The markets reacted positively to the news, with the Dow Jones Industrial Average up 1.7% at market close on Wednesday, while the S&P 500 and the Nasdaq Composite were up 1.6% and 2.1% respectively.
Elsewhere, the FTSE 100 closed up 1.1% and the Euro Stoxx 50 index also rose 1.2% on the back of the US rally.
David Joy, chief market strategist at Ameriprise Financial in Boston, told Reuters: "I think it is more just relief that the election has come and gone, no surprises, no tail-risk outcome occurred.
"Gridlock is fine, let's get on with things and worry about the fundamental issues like earnings, the (Federal Reserve)."
However, the US dollar was dampened by the news, as the outcome is expected to shift the monetary policy path in the US away from raising interest rates.
Against a basket of currencies, the dollar index fell 0.31%, with the while the euro is up 0.24% to $1.1453.
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