Forex Today: US Dollar edges lower as mood improves ahead of midterm elections
Here is what you need to know on Monday, November 2:
The US Dollar (USD) struggles to stay resilient against its major rivals amid a positive shift seen in risk sentiment at the beginning of the week. In the second half of the day, the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) data for October will be featured in the US economic calendar. Additionally, market participants will pay close attention to comments from central bankers. More importantly, midterm elections in the US will be held on Tuesday.
The USD Index ended the previous week marginally higher, supported by safe-haven flows that dominated markets following a sharp selloff in technology stocks. Early Monday, the USD Index stays in negative territory below 102.00, while US stock index futures rise between 0.4% and 0.9% on the day. Meanwhile, the benchmark 10-year US Treasury bond yield stays well below 5%.
US Secretary of State Marco Rubio said over the weekend that President Donald Trump would like to resolve the Iranian war “diplomatically,” without the use of military force. Meanwhile, Iran’s Supreme Leader, Mojtaba Khamenei, ordered his top military commanders to prepare for renewed confrontation with the US and Israel and expand Tehran’s options for retaliation, even as his top diplomat signalled progress in diplomatic talks. Crude Oil prices edge lower on Monday, with the barrel of West Texas Intermediate (WTI) losing about 2% on the day.
Dollar faces election risk as ING warns against chasing upside
Analysts at ING argue that the “main risk for the Dollar today is some precautionary unwinding of net-long positions ahead of Tuesday’s US midterm elections,” with positioning rather than fundamentals likely to dominate near-term moves. They note that “a Democratic sweep is trading around 68% in prediction markets,” a scenario they say “could be seen as slightly negative for the US Dollar from a few angles, from higher risk of government shutdown and gridlock on debt ceiling negotiations to potential damage to already shaky AI-related sentiment.” Against this backdrop, ING concludes that they “would be cautious in chasing the USD upside in the next few days.”
Follow our coverage of the US midterm elections.
Even though markets turned risk-averse in the second half of the previous week, Gold (XAU/USD) came under heavy selling pressure, possibly due to deleveraging following the stocks selloff, and lost more than 3.5% on Friday to touch its lowest level in a year near $3,870. Early Monday, XAU/USD corrects higher and trades above $3,900.
EUR/USD benefits from the modest USD weakness early Monday and recovers toward 1.1200 in the early European session. The data from Germany showed that Retail Sales declined by 2% on a monthly basis in September following the 1.2% increase recorded in August. This print came in worse than the market expectation for an increase of 0.4%.
GBP/USD holds its ground and trades marginally higher on the day, slightly above 1.3400 after posting gains for three consecutive trading days. On Thursday, the Bank of England will announce its monetary policy decisions.
USD/JPY inches higher in the European morning on Monday but continues to trade below 158.00. Japanese Finance Minister (FM) Satsuki Katayama said on Monday that the Joint FX statement with the US persists and the government will act against disorderly moves.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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