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.

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US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.27%	-0.11%	0.17%	0.07%	0.20%	0.27%	-0.27%
EUR	0.27%		0.18%	0.41%	0.33%	0.47%	0.53%	0.03%
GBP	0.11%	-0.18%		0.25%	0.16%	0.30%	0.36%	-0.14%
JPY	-0.17%	-0.41%	-0.25%		-0.07%	0.06%	0.11%	-0.41%
CAD	-0.07%	-0.33%	-0.16%	0.07%		0.15%	0.19%	-0.31%
AUD	-0.20%	-0.47%	-0.30%	-0.06%	-0.15%		0.06%	-0.45%
NZD	-0.27%	-0.53%	-0.36%	-0.11%	-0.19%	-0.06%		-0.50%
CHF	0.27%	-0.03%	0.14%	0.41%	0.31%	0.45%	0.50%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

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.

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

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