The US Dollar (USD) has traded broadly on the back foot on Wednesday, at some point retreating to the area of five-week lows as market participants were assessing the Democrats’ stunning victory at the US midterm elections.
ING strategists argue that the US Dollar’s reaction to the midterm elections should be short-lived. They see some short-term downside risk if Democrats win both chambers, mainly via regulation concerns and gridlock fears, but stress that the Federal Reserve narrative remains dominant.
MUFG’s Lee Hardman highlights US mid-term election risks, with a potential Republican loss of Congress seen as dampening Dollar strength. A less hawkish Fed, lower US Treasury yields and pressure on US AI-related equities add downside risks for the Dollar.