US Dollar: Midterm policy shifts soften tone – ING

At least one more Federal Reserve rate hike is supporting the Dollar’s outlook, according to ING analysts James Knightley, Carsten Brzeski, Padhraic Garvey, Lynn Song and Chris Turner. A resilient US economy also provides support. The analysts note that the Dollar weakened following the Democratic sweep in the US midterms, before trimming losses as Nasdaq futures stabilised. Further Dollar weakness remains possible into 2027 if political tensions and the prospect of a government shutdown escalate.

Dollar softens after 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.)