US Midterms and the Dollar: What Forex Traders Should Watch
Last updated
Published 31 October 2026, before the election result is known. Facts are attributed to the sources listed at the end. Market commentary is labelled as such, and the section marked “Our analysis” is HamroForex’s own view, not a forecast.
American voters go to the polls on Tuesday 3 November, and forex traders are asking the obvious question: will the midterms move the dollar? The honest answer from market strategists is that the vote matters, but probably less than interest rates, inflation and the mood in technology stocks. This guide sets out what the dollar is already carrying into election week, what history suggests, and how to manage the event risk.
Where the Dollar Stands Going Into the Vote
The US currency enters the week with firm fundamental support:
- Growth: The Bureau of Economic Analysis reported that US GDP grew at a 3.4% annualised rate in the third quarter, up from 2.2% in the second quarter and above the 3.2% consensus cited by investingLive.
- Inflation: The September PCE price index rose 3.6% from a year earlier, and the core measure rose 3.1%, according to the BEA data reported on 29 October.
- Policy: The Federal Reserve held its target range at 3.75%–4.00% on 28 October in a 10–2 vote. FXStreet reported that markets were pricing better than 75% odds of a December hike under Chair Kevin Warsh.
- Positioning and risk: A fresh round of selling in AI-related shares pulled Treasury yields lower and softened the dollar on Friday, and analysts have warned that crowded long-dollar positions could be trimmed before the election.
The dollar index traded near 101.7 in Asian hours on Friday, according to Moneta Markets, and has risen 0.3% in October, according to Reuters. EUR/USD was hovering around 1.12 after touching its weakest level since May 2025 earlier this month. Our recent article on the Fed’s 10–2 hold covers the policy detail.
What History Says About Elections and the Dollar
Pepperstone’s pre-election research found that the dollar weakened in three of the five months leading up to past midterm votes, but that its average return in the month after the vote was effectively flat. A sample of that size proves little, yet it matches a common view among strategists: the election itself is rarely the main driver of the next trend. Markets care about what the result implies for government spending and borrowing, trade policy, inflation and, ultimately, interest rates.
Three Channels Through Which Politics Reaches Forex
- Fiscal expectations and Treasury yields. VT Markets notes that a result raising expectations of borrowing or stimulus could lift yields and the dollar, while worries about debt sustainability can push yields higher even as the dollar weakens.
- Trade and regulation. Japanese market participants cited by BigGo Finance suggested that a Democratic win in both chambers could revive talk of tighter AI regulation, hurting US tech shares and favouring the yen through risk aversion.
- Risk sentiment. OFX says a change of control in both chambers could raise volatility and bring potential dollar weakness, while a result in line with expectations may barely register.
Our Analysis: Scenarios, Not Predictions
| Scenario | Likely market narrative | What traders may see |
|---|---|---|
| Result close to polls and consensus | Already priced in | Short-lived moves, focus returns to data within days |
| Divided Congress | Less room for new fiscal expansion | Mild dollar softness is possible, and USD/JPY upside may be capped |
| Surprise result, slow count or legal disputes | Uncertainty about policy and the transition | Wider spreads, sharp reversals, direction depends on yields versus risk sentiment |
Notice that every row ends with the same caveat. Whatever happens on 3 November, the Fed’s next steps will still hinge on jobs and inflation. A strong payrolls number on 6 November can erase an election-night move within hours.
Levels and Ranges Market Participants Are Watching
These ranges come from published market commentary and are not HamroForex price targets:
- EUR/USD: The 1.1080–1.1280 range cited by BigGo Finance, with FXStreet pointing to the 1.11–1.12 zone where short covering has already begun.
- USD/JPY: A 155.50–158.50 range, with the 200-day moving average near 158.5 seen as a ceiling, and Japanese authorities’ intervention risk also capping upside, according to FXStreet.
- Gold: VT Markets suggested watching the $4,100 area, which featured prominently in October trading, as possible support or resistance depending on price action.
The Event Calendar for the Next Ten Days
| Date | Event |
|---|---|
| 3 November | US midterm elections; US JOLTS job openings (10:00 ET) |
| 4 November | Euro area flash inflation for October |
| 5 November | Bank of England rate decision |
| 6 November | US Non-Farm Payrolls (8:30 ET) |
| 10 November | US consumer price index for October |
| 9 December | Final Fed meeting of 2026 |
How to Manage Event Risk
- Decide before the event whether you will trade it at all. Standing aside is a valid position.
- Cut position size, not just stop distance. Our lot size guide shows how to size a trade from your risk, and the Risk Management Calculator does the maths for you.
- Expect wider spreads and slippage around poll closes, data releases and headlines.
- Avoid chasing the first candle. Initial reactions to political news often reverse.
- Review how to trade NFP before Friday, and log your trades in the Forex Trading Journal.
You can follow every release above on our Forex economic calendar. For how oil and geopolitics feed into currencies, see how oil prices affect forex.
This article is for information and education only and is not investment advice. Trading leveraged products carries a high risk of loss, and you can lose more than you expect.
Sources
- US Bureau of Economic Analysis: GDP (advance estimate), third quarter 2026
- investingLive: US GDP advance for the 3rd quarter 3.4% vs 3.2% estimate
- EconoTimes: US GDP grows at a 3.4% annualized rate in the third quarter
- Federal Reserve: FOMC statement, 28 October 2026
- FXStreet: US midterms loom as the dollar’s rate support faces a political test
- Pepperstone: Trading the 2026 US midterm elections
- OFX: What the 2026 US midterm elections could mean for the US dollar
- VT Markets: How to trade market volatility during the US midterm elections
- BigGo Finance: Dollar-yen and the US midterm elections
- CNBC (Reuters): Yen gains after BOJ; AI jitters dent dollar
- Moneta Markets: BoJ hawkish hold and a softer US dollar
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