Vote counting is underway for the US mid-term elections. Initial indications are that the Republicans have wrested back control of the lower Chamber of Congress (the House of Representatives) but the Senate still seems on a knife edge. Overall, it appears that the US faces another period of divided government. 

Previous recent occasions when one party has controlled Congress while the other held the Presidency has resulted in political gridlock as any new policy moves became virtually impossible. That seems likely to be the case this time again given that the ongoing acrimonious relationship between the Democrats and Republicans seems to leave little room for compromise. One potential implication of this is that the probable ruling out of further near-term fiscal support for the economy may slightly raise the odds of US interest rates peaking at a lower rate than previously expected. However, any impact on expectations is likely to be marginal.  

Today’s calendar is extremely light with no data releases of note in any of the Eurozone, UK or the US. Very early Thursday morning, the October RICS house price balance for the UK will provide some indication of the impact of rising mortgage rates expectations. However, this is likely to have only a very limited impact as markets are really waiting for October CPI inflation data for the US due later on Thursday. That is generally seen as the key release of the week for global markets.

In the meantime, there are several central bank speakers today that will be of interest, although some are scheduled to speak about things other the near-term interest rate outlook. Bank of England policymaker Haskel will speak about investment in “intangibles’, on which he has written a couple of books and a topic which may have insight into the UK’s poor productivity performance. However, of more immediate relevance for the interest rate outlook may be comments from US Federal Reserve policymakers Williams and Barkin.