US Dollar: Tone Softens as Midterms Reshape the Policy Landscape – ING

Dollar losses following the Democratic sweep in the US midterms have narrowed as Nasdaq futures stabilise, according to ING analysts James Knightley, Carsten Brzeski, Padhraic Garvey, Lynn Song and Chris Turner. In their view, a resilient US economy and at least one more Federal Reserve rate hike offer support. However, they see room for the Dollar to weaken further into 2027 if political tensions and the prospect of a government shutdown intensify.

Could the Dollar weaken further after the Democratic midterm victory?

"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.)