US Dollar rebound from post-election reversal trims Japanese Yen gains

158.00 regained: USD/JPY rebounds from a session low of 157.39.
Reports of Democrats winning control of the House and Senate in the midterm elections triggered broad US Dollar selling.
Strong US macroeconomic fundamentals and persistent worries over the Middle East conflict underpin the USD.

USD/JPY is trading near 158.15 at the time of writing. The pair has recovered from a session low of 157.39 but remains below its intraday high of 158.75. On Wednesday, the Japanese Yen (JPY) retains modest gains against the US Dollar (USD), having surrendered almost half its advance following reports of a decisive Democratic victory in the US midterm elections.

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During Wednesday’s Asian session, confirmation that Democrats had secured Congress and the more closely contested Senate prompted widespread US Dollar selling. The result marked a sweeping rejection of President Donald Trump’s policies.

AI regulation fears unsettle investors

Expectations that Democrats will regulate the AI sector and curb data centre construction have driven investors towards the safety of US Government bonds. The rush into bonds has depressed yields and the US Dollar, while lifting traditional safe-haven currencies, including the Japanese Yen and Swiss Franc.

Strong fundamentals nevertheless continue to underpin the US Dollar, likely limiting further declines. Attention later in the day turns to the US ADP Employment Change Report, which is forecast to show a moderate easing in employment growth in October. The ISM Services Purchasing Managers’ Index (PMI), meanwhile, is expected to remain at levels consistent with solid business activity.

Brent Oil remains well above $100 as uncertainty surrounds the Middle East conflict, despite continued efforts to restart negotiations. Hours before the elections, the US struck Iranian targets, and Trump has left open the prospect of additional strikes. Fears of an all-out war would likely drive Oil prices higher and re-establish the US Dollar’s safe-haven status.

US midterm elections: key questions

US midterm elections: what do voters decide?

Held at the midpoint of a president’s four-year term, US midterm elections are federal polls in which voters elect all 435 House of Representatives members and about one-third of the Senate. In many states, voters also select governors and other state and local officials.

2026 midterm elections: when is polling day?

Voters go to the polls on Tuesday, 3 November 2026. Under federal law, Election Day falls on the Tuesday following November’s first Monday. Many states already have early voting and postal voting under way.

US midterm elections: why do the results matter?

Control of both chambers of Congress for the final two years of President Donald Trump’s term is determined by the midterms. The party holding a majority directs the legislative agenda 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 due in 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, rather than a sustained trend, is what most analysts anticipate. Markets widely regard a divided Congress as the base case and have partly priced it in. The response in Treasury yields may be more pronounced. Results that fuel expectations of fiscal stimulus typically support both yields and the US Dollar; a legislative impasse that restrains new spending can depress both. Funding disputes or debt-ceiling stand-offs can also generate political friction, briefly supporting the Dollar’s safe-haven appeal. Over six to twelve months, economic growth and Federal Reserve policy carry more weight than the election result.

Midterm elections: what is the pattern for US stocks?

US equities have historically struggled ahead of midterms before strengthening afterwards. In all 19 out of 19 midterm elections since 1950, the S&P 500 stood higher 12 months later, delivering an average gain of about 15%. Analysts attribute this pattern to the uncertainty that recedes once election results are settled. Past performance does not guarantee future returns, and some strategists caution that elevated valuations in 2026 could challenge that record.

Divided Congress: a positive for markets?

Investors have often favoured divided government, as legislative gridlock reduces the likelihood of far-reaching tax, spending and regulatory changes. With a Republican president in office, years following midterms that divide control of Congress have historically been favourable for the S&P 500. Funding deadlines, debt-ceiling disputes and congressional investigations remain risks that can increase short-term volatility.