The US dollar fell and gold and Treasury prices rose after Democrats won control of both the Senate and the House of Representatives in the 2026 midterm elections. US stock futures initially dropped sharply before recovering some of their losses.

The dollar was down 0.35% against a basket of major currencies after falling as much as 0.6%. Gold gained 2.4% to $4,022 an ounce. Nasdaq futures, which had fallen more than 2%, were down 0.25%, while S&P 500 futures lost 0.2%.

Treasury yields also declined, indicating higher bond prices. The two-year yield was down 1.6 basis points at 4.598%, and the 10-year yield fell two basis points to 4.929%. Deutsche Bank’s head of global macro, Jim Reid, said a divided government could make fiscal stimulus harder to pass, easing some concerns about the US fiscal outlook. Markets were also pricing in a more dovish path for the Federal Reserve.

The election result raised questions about the outlook for AI infrastructure in Texas and other states. Chris Beauchamp, chief market analyst at IG, said Greg Abbott’s loss of the Texas governorship had put the construction of additional data centres in doubt. He noted that AI shares including CoreWeave and Nebius had weakened overnight, as the sector was already facing concerns about spending.

Tapas Strickland, chief market strategist at Moomoo ANZ, said the pace of AI infrastructure development could slow in Texas as policymakers consider their approach to the sector. He said Texas and Georgia account for about a third of AI data-centre spending and projects, and that Democratic victories in both states could affect the wider AI industry.

The scale of The Democrats’ gains does not, however, give the party a veto-proof majority, according to Stephen Brown, chief North America economist at Capital Economics. He said that limits the immediate effect on policy, while the result increases the possibility of future legislation, including potential corporate and high-income tax increases and regulation that could delay AI development.

In Asian markets, Japan’s Nikkei fell 1.4%, while Hong Kong’s Hang Seng rose 1.3% and South Korea’s Kospi gained 0.4%.

Sources: The Guardian Business.