US Dollar Index gains modestly within range as midterm elections take centre stage

102.00 remains out of reach for the US Dollar Index. Its recovery from session lows is still contained within earlier trading ranges.
Hostilities in Iran and rising oil prices are supporting the Greenback, while uncertainty over US politics restrains its advance.
A Democratic sweep could weigh on the USD in the short term, according to ING experts.

The 101.50 area marked session lows for the US Dollar Index (DXY). The index has since recovered but remains below the 102.00-102.10 zone that blocked advances on Monday and Friday. Against most major peers, the US Dollar is trading with a modest upward bias on Tuesday. Renewed hostilities in Iran have raised doubts over the peace process and lifted oil prices, although uncertainty surrounding the US midterm elections has so far constrained gains.

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Growing fears of renewed hostilities in Iran are lending the Greenback some support. The concerns follow US military strikes on targets on Iran’s Qeshm Island in the Strait of Hormuz, an operation US authorities described as “defensive”.

Iran peace deal: Trump maintains optimism

Efforts to restart negotiations are continuing, with some backing from the US side. Playing down the prospect of an all-out war, US President Donald Trump said a peace agreement with Iran “could happen,” adding that, in his view, Tehran "wants a settlement, as soon as possible."

Monday’s US ISM Manufacturing Purchasing Managers' Index (PMI) release pointed to a strong start to the fourth quarter for the US economy. Factory activity exceeded expectations, while price pressures remained elevated.

Despite those readings, the US Dollar received little meaningful support. Investors are holding off on investment decisions until the US midterm election results are known. ING strategists say they “don’t expect today’s US midterm results to cause structural shifts in FX.” However, the bank’s analysts see potential “short-term pressure” on the Dollar if the Democrats win both chambers: the House, which is “widely expected,” and the Senate, which remains a “close call.”

US midterm elections: key questions

US midterms: which offices are contested?

Held at the midpoint of a president’s four-year term, the US midterms are federal elections. All 435 House of Representatives seats and about one-third of Senate seats are contested. In many states, voters also elect governors and other state and local officials.

2026 midterms: when does voting take place?

Tuesday, 3 November 2026 is Election Day. Under federal law, voting takes place on the Tuesday following November’s first Monday. Many states already have early and postal voting under way.

US midterms: what is at stake?

Control of both chambers of Congress during the final two years of President Donald Trump’s term is determined by these elections. Whichever party holds the majority sets the legislative programme and selects committee leaders. In the Senate, it also controls the confirmation of judges and senior officials.

2026 midterms: is the presidency being contested?

No. Presidential elections take place every four years, with the next scheduled for November 2028. Often regarded as a referendum on the incumbent president’s party, midterms have historically tended to cost that party seats in the House.

2026 midterms: what could change for the US dollar?

A limited, temporary move in the US Dollar is what most analysts anticipate, rather than a sustained trend. Markets have partly priced in a divided Congress, the widely expected base case. The response in Treasury yields could be more pronounced. Results that strengthen expectations of fiscal stimulus generally push yields and the US Dollar higher; a legislative impasse that curbs fresh spending can weigh on both. Disputes over funding or the debt ceiling can also give the Dollar a brief safe-haven boost. Over a six-to-twelve-month horizon, economic growth and Federal Reserve policy carry more weight than the election outcome.

Midterm elections: how have stocks performed?

Historically, US equities have struggled ahead of midterm elections before strengthening afterwards. Since 1950, the S&P 500 has risen over the 12 months following all 19 out of 19 midterms, delivering an average gain of about 15%. Analysts attribute this pattern to the easing of uncertainty after results are announced. Past performance does not guarantee future returns, and some strategists warn that elevated valuations in 2026 could challenge that record.

Divided Congress: why can markets welcome it?

With political gridlock reducing the likelihood of major tax, spending and regulatory changes, markets have frequently responded favourably to divided government. During Republican presidencies, the S&P 500 has historically performed well in the years after midterms that left control of Congress split. However, funding deadlines, debt-ceiling disputes and congressional investigations remain sources of short-term volatility.