Key Takeaways
- The US dollar dropped sharply after the midterm elections, with the Democrats gaining control of both the House and Senate.
- US shares surged, while the Dow Jones increased by 3.0%, and bond yields decreased.
- The NZD faced pressure due to disappointing jobs data, with employment falling and the unemployment rate rising to 5.7%.
- China’s yuan softened as services growth slowed, with the PMI decreasing to 50.8 and input inflation reaching a five-month high.
- Overall, USD trends remain lower as various foreign currencies gain strength against the US dollar.
US dollar lower after election
The US dollar was sharply lower overnight as markets reacted to a stunning vote against President Trump in the US midterm elections.
The result produced the largest Democratic majority in the House of Representatives since 2008, the largest midterm vote for the party since 1974, and saw Republicans lose ground in 99% of counties, according to Reuters.
Democrats took control of both the House and Senate.
US shares jumped, with the Dow Jones up 3.0%, while bond yields fell. Brent crude oil collapsed 9.0% on hopes for a quicker resolution to the Iran war.
AUD/USD gained 0.6%, while NZD/USD also climbed 0.6%.
European currencies also gained against the US dollar, with EUR/USD up 0.3% and GBP/USD gaining 0.4%.
The traditional safe havens also strengthened, with the Swiss franc and Japanese yen higher.
In Asia, USD/SGD climbed 0.2%, while USD/CNH gained 0.1%.
NZD pressured as jobs data disappoints
New Zealand’s labour market weakened in Q3, reinforcing signs of slowing economic momentum.
Employment unexpectedly fell 0.1% q/q, versus expectations for a 0.4% increase, while annual employment growth slowed to 0.7% y/y versus the 1.6% forecast.
The unemployment rate edged up to 5.7% from 5.6%, above market expectations of 5.5%, while the participation rate eased to 70.4% from a revised 70.6%.
NZD/USD fell to a three-week low before later rebounding as the US dollar weakened following the election.
The pair faces initial resistance at the 21-day EMA of 0.5645, followed by the 50-day EMA at 0.5693. Support is located at 0.5550.
Yuan softens as services growth cools
China’s services sector expanded at its slowest pace in three months in October, signalling softer economic momentum.
The RatingDog Services PMI slipped to 50.8 from 51.6 in September, although it remained above the 50 level that separates expansion from contraction. New business growth held steady, export orders increased for a sixth straight month and firms continued hiring.
However, rising material, fuel and wage costs pushed input inflation to a five-month high. Intense competition also led businesses to cut prices for a second consecutive month, while business confidence fell to its weakest level since July.
USD/CNH rose overnight and now trades 0.5% above its 2 November low of 6.6426. Resistance is located at the 50-day EMA of 6.6964, followed by the 100-day EMA at 6.7292.
Meanwhile, USD/CNH and EUR/CNH are at two-week highs, while SGD/CNH has reached a one-week high.
USD lower after election
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 2- 7 November
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
