Dollar Declines in Forex Markets as Midterm Elections on the Horizon

The forex market’s nerves around the American political situation were revealed on Monday as one final day of campaigning took place before voters went to the polls.

The midterm elections, which take place today (Tuesday), are likely to be significant in a number of ways. These particular elections are for Congress, the country’s legislative body, and will see all representatives and some senators from across the country fighting for their seats.

The Democrat party is up against Donald Trump’s Republicans. The Democrats are believed to be on track to win the House of Representatives, but the Senate may well remain Republican.

However, if the numbers shift away from the Republicans in the Senate, it may affect Trump’s ability to pass laws and appoint his own candidates to senior positions.

With the uncertain elections on the horizon, the dollar index, which measures the currency’s value in relation to several other major currencies around the world, dropped during trading on Monday. It went down 5.3 basis points, leaving it at 96.39.

These developments come after the dollar enjoyed a significant rise in its fortunes over the last few weeks. The dollar index reached its highest point in 16 months last week and saw levels of 97.20.

The euro, meanwhile, surged ahead in the gap left by the declining dollar. It managed to reach $1.140 in the EUR/USD pair over the course of the day.

The British pound, however, didn’t have a positive day. It was largely stagnant at $1.302 in the GBP/USD pair.

Elsewhere in the forex markets, the Reserve Bank of Australia announced its interest rate decision earlier today. As expected, it kept rates at their current level of 1.5%.

Looking ahead to the remainder of the week, there’s plenty to look out for in the forex markets.

Today will see a range of information from New Zealand. Employment change data covering the third quarter of the year will be out at 9.45pm GMT, while unemployment rate information for the same period will be out then.

Tomorrow, the Reserve Bank of New Zealand is also due to make an interest rate decision at 8pm – although it is believed to be prepared to hold rates steady at 1.75%.

Japanese foreign investment data is due out at 11.50pm GMT tomorrow evening.

On Thursday, Chinese export and import data will be closely watched given the recent trade battles between the country and the US.

Similar data for Germany is due out at 7am GMT. It’s believed by analysts that the month on month change in exports for November is likely to go from -2.7% to 0.8%.

Next up will be the European Commission’s economic growth forecast report, which is due out at some stage tomorrow. The reports vary in terms of their coverage areas and the periods they focus on but could prove useful for euro investors.

The Federal Reserve’s interest rate decision is due at 7pm GMT, and another hold – this time at 2.25% – is expected to be implemented by the committee.