CICC: With Democrats controlling both chambers, some medium-term support for the US dollar may gradually weaken.

CICC released a research report stating that Democrats achieved a clear victory in the US midterm elections, winning control of both chambers of Congress. Over the next two years, the Trump administration will face significantly stronger congressional checks and balances. The firm believes that this election overall increases the likelihood that medium-term support for the US dollar will weaken. The firm noted that fiscal expansion and tariff policies will face more constraints, potentially reducing additional upward pressure on US demand and inflation; overseas military actions will be subject to more checks and balances, which may also lower the energy risk premium. At the same time, AI investment's support for US CKH HOLDINGS asset returns will continue, but its marginal boost to the US dollar may gradually diminish. The firm stated that space for new fiscal stimulus is limited, and resistance to further tariff expansion is rising; if new fiscal stimulus and tariff measures are weaker than previously expected, market pricing for US growth, inflation, and further rate hikes may moderate, and short-end rate support for the US dollar may weaken marginally. Regarding AI, after Democrats take control of Congress, regulatory scrutiny of large technology companies may intensify, and policy orientations and implementation pace across states may diverge, increasing uncertainty for companies regarding project approvals, construction costs, and investment returns. If overseas capital consequently slows new allocations to US technology assets, cross-border capital inflows' support for the US dollar may also weaken. However, the likelihood of a comprehensive AI moratorium at the federal level is low, and direct AI capital expenditure by the five major cloud providers is expected to continue growing, though growth may slow as the investment base rises, with marginal contributions potentially declining gradually. The firm also noted that pressure from new US Treasury supply may ease, but the US may hit the debt ceiling again around mid-2027, and partisan wrangling could increase risks of shutdowns and liquidity disruptions. Geopolitically, congressional constraints on military action will strengthen. If the risk of escalation in the US-Iran conflict declines, the geopolitical risk premium on oil prices may fall, and the US dollar's previously gained energy relative advantage and safe-haven support may also weaken. However, the new Congress will not formally take office until January 3, 2027, so short-term military actions and oil prices still carry reversal risks. Overall, this election increases the likelihood that medium-term support for the US dollar will gradually weaken, with subsequent effects depending more on the actual impact of policy changes on the US's relative CKH HOLDINGS interest rate advantage.