In early November, the FOREX currency market continues to closely monitor the ratio of the euro and the US dollar. One of the important factors capable of influencing the dynamics of EUR/USD in the coming weeks is the midterm elections to the US Congress, which will take place on November 3, 2026.
For the currency market, this event is important not only from a political point of view. The voting results may affect investors' expectations regarding Washington's budget policy, tax decisions, government spending, and the further economic course of the United States. As a result, the dollar may face additional fluctuations, and the euro may get an opportunity to strengthen against the American currency.
Euro remains under pressure from French problems
As of the morning of November 2, the EUR/USD pair was trading around 1.1150-1.1170 dollars per euro. Thus, the European currency was near its lowest values in the last 17 months.
One of the reasons for the euro's weakness was the decision of the rating agency Fitch to revise the outlook on France's credit rating from stable to negative. Investors are concerned about the country's high public debt, budget problems, and political uncertainty. This reinforces concerns about the sustainability of the eurozone economy and creates additional pressure on the single currency.
How will the midterm elections in the US affect the dollar?
The voting on November 3 will determine the composition of the House of Representatives and part of the US Senate. For financial markets, it is especially important whether the Democrats will gain control of one or both chambers of Congress.
Several scenarios are possible:
- A Democratic victory in one or both chambers. This may limit the ability of the Trump administration to carry out tax and budget initiatives. At the same time, new disagreements over government spending and raising the debt ceiling are possible.
- Maintaining Republican control. Such an outcome will allow the administration to retain more opportunities for implementing its economic program. This may support expectations of further fiscal stimulus and yields on US government bonds, which is potentially favorable for the dollar.
- A divided Congress. Increased political contradictions may increase uncertainty regarding US budget decisions.
At the same time, market participants already price in part of the possible voting outcomes. Therefore, the dollar's reaction will depend not so much on the fact of victory for one party or another, but on how unexpected the election outcome turns out to be for investors.
What is happening with the monetary policy of the Fed and the ECB?
Another important factor for EUR/USD remains the difference in interest rates between the US and the eurozone.
On October 29, the European Central Bank kept interest rates unchanged, but warned of rising inflation risks due to more expensive oil and gas. The energy crisis related to the conflict around Iran forces the regulator to consider the possibility of further tightening of monetary policy.
According to Reuters, ECB officials admit a rate hike in December, after which a pause may follow. If expectations of rate hikes are confirmed, this may support the euro.
In the US, investors, in turn, are assessing the prospects for further Fed decisions. US statistics on the labor market, inflation, and economic growth will be of particular importance, as strong data may strengthen the arguments in favor of maintaining a relatively tight monetary policy.
Other factors influencing the euro exchange rate
In addition to the US elections and central bank decisions, the following circumstances currently affect the currency market:
- Energy prices. The rise in oil and gas prices increases inflation risks in Europe, but at the same time worsens economic growth prospects.
- The state of the eurozone economy. The resilience of European production, consumption, and business activity may support the euro.
- US stock markets. The weakening of technology stocks and a decline in investors' risk appetite may change demand for the dollar and other safe-haven assets.
- Geopolitics. The development of the conflict around Iran and the situation in energy markets remain sources of uncertainty for both currencies.
Analysts also note that in late October, the American currency was under pressure due to falling yields on US Treasury bonds. This created conditions for a recovery in EUR/USD, but French problems again limited the euro's potential.
Euro prospects for the coming days
In the near future, the main attention of FOREX participants will be focused on the results of the midterm elections to the US Congress and US statistics for October.
If the voting results increase concerns about US fiscal policy, and US bond yields continue to decline, the euro may get an opportunity for recovery.
However, the European currency faces its own problems: French public debt, expensive energy, and risks of a slowdown in the eurozone economy. Therefore, counting on a quick and sustained strengthening of the euro is premature so far.
The main guide for the EUR/USD market this week is a combination of political news from the US, expectations regarding Fed and ECB rates, and energy price dynamics. It is these factors that will determine whether the euro can move away from multi-month lows or will continue to lose ground against the dollar.
