Forex Volatility for the Dollar as Democrats Seize Control of House

Camila Martinez

democratic party symbolThe Democratic party surged ahead in the US midterm elections – leading to significant volatility for the US dollar.

While Donald Trump’s Republicans managed to keep control of the Senate, which is the upper chamber of Congress, the Democrats took the House of Representatives for the first time in eight years.

It is believed by analysts that the Democrat victory could harm the dollar given that it will be seen as a blow to Trump, who is largely perceived to be pro-corporations.

This uncertainty was born out by the performance of the dollar as the day unfolded.

The dollar index, a tool used to assess how the currency is performing compared to other major currencies, declined 0.2% to the 96.12 level, which is significant during a period when it has seen 16-month highs.

Compared to specific currencies, the dollar also lost ground. The EUR/USD pair rose a little to the $1.1440 level, although it had previously reached a high of $1.1473. Against the yen, the dollar dipped 0.07% to the 113.33 position. The British pound, meanwhile, also benefitted – and was up 0.22% in the GBP/USD pair at $1.3124.

The remainder of the week holds plenty to keep forex traders interested.

Later today, the Reserve Bank of New Zealand is expected to hold interest rates firm at 1.75% when it makes its announcement at 8pm GMT.

Following this, Japanese bank lending figures for October will be out at 11.50pm GMT. It is expected that these will show a slight year on year change from 2.3% to 2.4%.

Looking ahead to tomorrow, the Swiss unemployment rate covering October will be released at 6.45am GMT. It is expected to show no month on month change from its previous position of 2.5%.

German export data for September is due out at 7am. This is expected to show a healthy month on month change from -0.1% to +0.3%.

Later in the day, Canadian housing starts information for October is expected at 1.15pm GMT. This is expected to show a year on year rise from 189,000 to 200,000.

The US Federal Reserve will make its interest rate decision at 7pm, although no change from the current level of 2.25% is expected.

Some political instability may be on the cards during Thursday.

This is expected to be the first full day since the results of the US midterm elections were announced. Over in Germany, the Christian Democrat party (CDU) will elect its new chairperson after Angela Merkel, widely regarded as Europe’s most powerful leader, said she would step down.

Into Friday, Australian home loans information will be out at 12.30am GMT. At the same time, the Reserve Bank of Australia will make its monetary policy decision.

It is expected to be a busy day for the Asia-Pacific region, as this will be swiftly followed by a series of Chinese data releases.

The October consumer price index for China is due out at 1.30am GMT, and year on year changes are expected to hold firm at 2.5%.

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Camila Martinez
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