Daily Forex Analysis

The US dollar weakened following the sweep of Democracts in the midterm elections, while renewed hopes for a resolution to the US-Iran conflict pushed oil prices lower and eased inflation concerns. 

Early US midterm results pointed to Democrat gains, raising prospects of a divided government, political gridlock, reduced spending, and tighter AI regulations. Fiscal uncertainty weakened the dollar, supporting major currencies and precious metals. However, the S&P 500 has risen one year after every midterm since 1946, suggesting limited long-term market impact.

Washington launched limited defensive airstrikes on Iran's Qeshm Island following an Iranian missile attack on a U.S. aircraft, while Iranian media confirmed the blasts and President Trump adopted a milder tone despite earlier warnings. 

Markets opened the week on a quiet note on Monday following last week’s volatility. Markets continue to price roughly a 75% chance of a Fed rate hike in December. 

Strong US economic growth and persistent inflation reinforced expectations for another Federal Reserve rate hike in December, keeping precious metals under pressure. 

The US dollar strengthened after the Federal Reserve held interest rates steady at 3.75%–4.00%, with two hawkish dissents reinforcing expectations for another rate hike in December. 

The Fed takes center stage today, with markets pricing a 92.8% chance of holding rates at 3.75–4.00%. Investors will focus on Chair Kevin Warsh’s guidance as persistent inflation and a cooling labor market complicate policy. 

Easing oil prices offered some relief to precious metals ahead of major central bank policy decisions, with gold stabilizing near $4,005 and silver holding around $53 after recent declines.