Donald Trump blow after Alabama vote: The dollar has held steady after Democrat Doug Jones beat Republican Roy Moore to a Senate seat (USDGBP, USDEUR)

The dollar weakened only slightly overnight, despite Donald Trump being dealt a hefty blow in a US Senate vote.

Although Trump had publicly supported Republican Roy Moore in the race to gain the US Senate seat for Alabama, Democrat Doug Jones won.

It will be the first time a Democrat has held the seat for Alabama in a quarter of a century, and will leave the Republican party with the slimmest of majorities in the Senate: 51-49.

Having dipped initially, the dollar recovered most of its losses this morning. Against the yen, it fell as low as ¥113.19 in the wee hours, before rising to ¥113.41. Meanwhile, it was flat against the euro at €0.8513, having fallen as low as €0.8502. It edged 0.1 per cent lower against sterling, to £0.7502.

Fed lookahead

The lack of reaction to the vote could be because traders are focusing on this evening’s meeting of the Federal Reserve, at which it is strongly expected to raise interest rates again.

“The result of the meeting is hardly in doubt,” said Marshall Gittler, chief strategist at ACLS Global.

“The market puts a 98 per cent probability on a hike, so if they don’t, it’ll be the upset of the century – and the Fed doesn’t like to upset the markets.”

However, he added: “The question then is, what will the famous ‘dot plot’ look like? Do they stick with three rate hikes next year, or cut back to only two? Or as some analysts are now suggesting, go to four perhaps? That would be a big dollar-positive surprise.”

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