US Dollar softens as midterms drive policy shifts – ING

A resilient US economy and at least one further Federal Reserve rate hike are supporting the dollar, according to ING analysts James Knightley, Carsten Brzeski, Padhraic Garvey, Lynn Song and Chris Turner. The currency weakened following the Democratic sweep in the US midterm elections, although losses have narrowed as Nasdaq futures stabilise. The analysts nevertheless see room for further dollar weakness into 2027 should political tensions and the prospect of a government shutdown intensify.

Dollar weakens following Democratic midterm sweep

"The dollar is softer on the outcome, though it has recovered from its lows seen in early Asia when a sharp fall in Nasdaq futures was warning of a larger re-pricing of the tech story."

"Limiting a larger dollar correction on this news is probably a still-resilient US economy and at least one more rate hike from the Federal Reserve."

"The dollar could see a little more weakness into 2027, however, if an emboldened Democratic Party takes greater issue with Republican policy, including deregulation and the AI build-out."

"And the potential for a prolonged government shutdown in mid-2027 adds to the case for a weaker dollar next summer."

"Overall, we retain a bias towards the 10-year yield heading towards 5.25%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)