US Dollar Index edges up within range with midterm elections front and centre
- The US Dollar Index is picking up from session lows but remains within previous ranges, below 102.00.
- The Greenback is drawing support from hostilities in Iran and higher Oil prices, but US political uncertainty is capping gains.
- ING experts affirm that a Democratic sweep might put some short-term pressure on the USD.
The US Dollar shows a mild bullish tone against most of its main peers on Tuesday as fresh hostilities in Iran cast doubt over a peace process and boost Oil prices, while uncertainty about the US midterm elections keeps rallies limited so far. The US Dollar Index (DXY) has bounced up from session lows in the 101.50 area but remains capped below the 102.00-102.10 area, which capped upside attempts on Monday and Friday.
The Greenback is drawing some support from the increasing concerns of a resumption of hostilities in Iran after the US military hit targets on the Iranian Qeshm Island in the Strait of Hormuz, in what the US authorities called a “defensive” operation.
Trump remains optimistic about a peace deal with Iran
Meanwhile, efforts to bring the parties back to the negotiating table remain alive, and have obtained some support from the US side. US President Donald Trump downplayed the possibility of an all-out war and affirmed that a peace deal with Iran “could happen,” as, in his opinion, Tehran "wants a settlement, as soon as possible."
On the macroeconomic front, US ISM Manufacturing Purchasing Managers' Index (PMI) figures, released on Monday, showed stronger-than-expected factory activity, with price pressures at high levels, suggesting thst the US economy entered the fourth quarter on strong footing.
The data, however, failed to provide any significant support to the US Dollar, as investors await the result of US midterm elections to make investment decisions. Strategists at ING argue they “don’t expect today’s US midterm results to cause structural shifts in FX.” ING analysts, however,, flag some “short-term pressure” for the Dollar if the Democrats were to secure both the House, which is “widely expected,” and the Senate, described as a “close call.”
US midterm elections FAQs
The US midterm elections are the federal elections held halfway through a president's four-year term. Voters choose all 435 members of the House of Representatives, about one-third of the Senate, and, in many states, governors and other state and local officials.
Election Day is Tuesday, November 3, 2026. Federal law sets it as the Tuesday after the first Monday in November. Early voting and mail voting are already under way in many states.
They decide which party controls each chamber of Congress for the last two years of President Donald Trump's term. The majority party sets the legislative agenda, chooses committee leaders and, in the Senate, controls confirmations of judges and senior officials.
No. The president is elected every four years; the next presidential election is in November 2028. Midterms are often seen as a referendum on the sitting president's party, which historically tends to lose House seats.
Most analysts expect a modest, short-lived reaction in the US Dollar rather than a lasting trend. A divided Congress is widely seen as the base case and is partly priced in. Treasury yields may react more noticeably to the results. Outcomes that raise expectations of fiscal stimulus tend to lift yields and the US Dollar, while gridlock that limits new spending can pull both lower. Political friction, such as funding or debt-ceiling standoffs, can also briefly lift the Dollar as a safe haven. Over six to twelve months, growth and Federal Reserve policy matter more than the vote.
US stocks have historically been weak before midterms and strong after them. Since 1950, the S&P 500 has been higher 12 months after every midterm election, 19 out of 19, with an average gain of about 15%. Analysts link the pattern to uncertainty fading once results are known. Past performance does not guarantee future returns, and some strategists note that high valuations in 2026 could test the streak.
Markets have often welcomed a divided government because gridlock makes sweeping changes to taxes, spending and regulation less likely. Under a Republican president, the S&P 500 has historically done well in years following midterms that split control of Congress. The risks are funding deadlines, debt-ceiling fights and congressional investigations, which can add short-term volatility.
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