Following the Democratic Party's securing majorities in both chambers of Congress in the U.S. midterm elections, concerns have spread over fiscal policy and the interest-rate outlook from next year onward, drawing attention to currency-market movements. Nomura Securities' analysis points to the possibility of greater upside resistance for USD/JPY.
After the U.S. midterm elections, market expectations have grown that the likelihood of additional fiscal measures will decline because the Democratic Party secured majorities in both chambers of Congress. Concerns have increased over the pace of tax cuts and the sustainability of economic stimulus measures, with the effects of tax cuts expected to fade in 2027. Downward pressure on technology-related stocks is expected to continue, while concerns over tighter AI-related regulation also remain.
As Democratic control of Congress creates divided government with the White House, the scale of future data-center investment and fiscal spending may be constrained. As a result, the outlook for U.S. interest rates is expected to remain within the range priced in by the market, while the assumption of cumulative rate hikes of approximately π40bp by next summer is maintained. A decline in U.S. Treasury yields is expected to intensify downward pressure on the dollar.
In the oil market, attention is focused on changes in the U.S. stance toward Iran and developments in the Middle East, with NY crude oil at times falling below $90. If tensions in the Middle East ease, oil transportation could return to normal, potentially improving Japan's trade surplus. This is described as a possible positive factor for the yen.
In terms of market fund flows, overseas investors' momentum in investing in U.S. Treasuries has been slowing, and risks such as government shutdowns and the debt ceiling are reportedly attracting greater attention. Concerns over tighter AI-related regulation may continue to weigh on equity markets, and a cautious outlook has been expressed for USD/JPY movements.