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The US dollar fell as Democrats seized control of Congress in seismic midterm elections.
The Democratic party has regained control of both houses of the United States Congress in a stunning verdict on Donald Trump’s second presidential term. Wins in Senate races in Republican strongholds such as Texas, Kansas and South Carolina pointed to a ‘blue tsunami’ and a new balance of power in American politics.
Sterling strengthened by over half a cent against the US dollar as the votes trickled in across the wee hours. As of this morning, the pound to euro rate sits close to its best since March 2025, although tomorrow’s Bank of England decision is the imminent threat to that strength.
It is hard to do justice to the significance of the swing across the Atlantic. Just two years after a historic Republican wave, it was the Democrats that flipped almost every competitive race and struck at the heart of what had seemed an impenetrable red wall. The count is still ongoing in some races and we may not know the final seat tallies until tomorrow.
On the campaign trail, the president had urged voters to imagine he was on the ballot. With the cost of living, immigration and other key features of Trump’s agenda looming large, his decision ultimately backfired. Trump did say he would accept the results of the election, removing that particular risk.
The implications for currency markets are a little murky. Typically, having different parties control the White House and Congress is positive for the US dollar as it makes new legislation less likely and encourages bipartisanship. However, several Democratic candidates have pledged to rein in the data centre build out, leading to concerns greater scrutiny of the tech sector could dampen economic growth.
It’s also set to be a busy few days away from America. This morning’s eurozone inflation data will be a key factor for the euro, while tomorrow’s Bank of England meeting is the kind of high-stakes event capable of stunting sterling’s recent strength.
GBP: One last check
The pound remained close to its recent highs against the euro and dollar heading into the middle of the week. Expectations for tomorrow’s Bank of England meeting continue to support it, with economists anticipating the first rate rise since way back in 2023. The final results of October’s services survey is the last significant domestic test before that decision.GBP/USD: the past year
EUR: December hike looking likely
Currency markets judge the chance of an interest rate hike at the European Central Bank’s December meeting as being around 90%. That may change following inflation data due this morning, but the euro is being propped up by signals of more restrictive policy coming fromGBP/EUR: the past year
USD: Strong economy underpins political change
Even if this week’s news will be dominated by politics, the US dollar can always fall back on an economy that has proved resilient to countless shocks. Job openings rose beyond 7.5m in September, a four-month high and smashing forecasts in the 7.1m range.USD/GBP: the past year
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