The U.S. dollar rose in early European trade Tuesday, with the safe haven benefiting from uncertainty ahead of the U.S. midterm elections, which could change the political climate.
At 03:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher at 110.241, rebounding from the previous session’s weakness.
Attention Tuesday is firmly fixed on the start of voting in the U.S. midterm elections later in the day, with the Republicans widely expected to take control of the House of Representatives, potentially stymieing President Joe Biden’s legislative agenda.
Worries also exist that a conclusive result could take days to be officially recognized, given the heated U.S. political climate.
Additionally, “a split Congress and President Biden left to focus on international issues such as trade could end up proving mildly positive for the dollar,” said analysts at ING, in a note.
“The Biden Administration’s stance on Chinese trade has not been as accommodative as many had expected back in 2020 and the recent tightening of restrictions in the semiconductor sector could lay the groundwork for a more hawkish trade path into 2024.”
That said, the outcome could still be negative for the dollar if it leads to less fiscal stimulus.
EUR/USD fell 0.2% to 0.9995, dipping back below parity ahead of the release of the latest Eurozone retail sales data for September.
This is expected to show sales down an annual 1.3%, an improvement of 0.4% on the month, but still indicative of severe pressure on discretionary spending in the region as inflation continues to run at record levels.
GBP/USD fell 0.4% to 1.1465, handing back some of the previous session’s gains, while the risk-sensitive AUD/USD fell 0.5% to 0.6446 after Australian consumer sentiment fell to a two-year low, according to data released earlier Tuesday, on the back of rising interest rates and high inflation.
USD/JPY rose 0.2% to 146.83, with data from the Ministry of Finance showing that Japan’s foreign exchange reserves declined further in October, following the previous month’s record drop, as Japanese authorities attempted to support the beleaguered yen.
USD/CNY rose 0.4% to 7.2555, amid waning hopes that the Chinese government will scale back its zero-COVID policy in the near future.