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Commerzbank’s Volkmar Baur highlights that South African local elections and coalition outcomes could affect national reform momentum, while the US decision to remove AGOA preferences from next year threatens key export sectors such as autos and agriculture. He concludes that constructive national cooperation and continued structural reforms are crucial, but near-term conditions for the Rand remain difficult.

Reform risks and export headwinds

"While votes are still being counted in the US, South Africans are heading to the polls today. Mayors and municipal councils are up for election across the country, with the city governments of Johannesburg, Cape Town and Durban likely to attract particular attention. Clear-cut election results are unlikely in most cases, meaning that the vote will probably be followed by coalition negotiations that could drag on for several weeks."

"From a capital-market perspective, the election is not entirely straightforward to interpret. A strong showing by the Democratic Alliance (DA) would certainly be welcomed by markets. However, if the DA were to perform so strongly that the African National Congress (ANC) felt threatened, the local elections could put pressure on the coalition at the national level."

"This, in turn, would be negative for reforms and the economic outlook. It will also be interesting to see what kind of coalitions the ANC is prepared to enter into if faced with a choice between the DA and the left-wing Economic Freedom Fighters (EFF) or uMkhonto weSizwe (MK). Should the more left-leaning factions within the ANC prevail, this too could put a strain on the coalition at the national level."

"The geopolitical backdrop underscores just how important further reforms remain. On Monday, the US announced that South Africa will no longer benefit from the African Growth and Opportunity Act (AGOA) from the beginning of next year."

"For the rand, it will therefore be all the more important that the coalition at the national level quickly resumes constructive cooperation after the local elections and continues to push ahead with structural reforms. For the time being, however, the environment for the ZAR remains challenging."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

ING’s Chris Turner notes Democrats’ sweeping midterm victory has initially weighed on the Dollar and short-dated US rates, but much of the move is being reversed as investors refocus on a strong US economy and a tightening Federal Reserve. He highlights DXY support near 101.25 and warns that any bond market upset could pressure USD/CHF, echoing August’s reaction.

Democrat win and AI worries

"Given AI's role in powering the US economy, speculation over whether a new Democrat Congress would slow AI capex plans briefly hit markets. The chip exporter-heavy stock markets of Korea and Taiwan were briefly down 3-4% overnight on news of the blue wave, but have since recouped all those losses."

"That the initial market moves are being reversed probably owes to the fact that the Democrats do not take office until January. Also, one wild-card risk removed from the dollar's downside has been President Trump accepting these results. However, overnight price action could provide a preview for markets in 2027."

"We had felt that a Democrat Congress would be a mild dollar negative – both in terms of what it would mean for the AI story and the prospect of a prolonged US government shutdown potentially from next summer."

"Also in focus today will be the 1330CET release of the US Treasury's quarterly refunding plans. Views are that the Treasury will continue to try cutting long-end supply. Let's see whether the short-end can handle all the new issuance."

"As above, we would not chase the dollar lower today for what, after all, could be a 2027 story. Instead, the dollar looks likely to be traded through the macro/monetary lens, which remains supportive. The overnight DXY low of 101.25 looks to be an important support level which may hold into October jobs report."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• EUR/GBP has found support above 0.8300, but remains capped below the 0.8365 area.
• Market expectations of a BoE rate hike on Thursday are keeping Pound downside attempts limited.
• The technical picture shows a fading bearish momentum with bulls still absent.

The Euro (EUR) remains practically flat against the British Pound (GBP) on Monday, with both currencies appreciating sharply against the US Dollar (USD) following the results of the US midterm elections, but with the GBP buoyed by market expectations that the Bank of England (BoE) will hike interest rates on Thursday. Against this background, the EUR/GBP pair remains stuck in a 40-pip range, just above 18-month lows, at 0.8330.

Eurozone preliminary data released on Wednesday revealed that consumer inflation accelerated to three-year highs in October, which adds pressure on the European Central Bank (ECB) to tighten its monetary policy further in the coming months. These figures have offset a downward revision of October’s HCOB Services Purchasing Managers Index (PMI) figures released earlier in the day.

In the UK, all eyes are on the BoE, which is widely expected to raise its Bank Rate by 25 basis points to 4% on Thursday. The final UK S&P Global Services PMI has also been revised lower, but the impact on the Pound was minimal.

Technical Analysis: EUR/GBP is looking for direction between 0.8320 and 0.8365

EUR/GBP trades at 0.8347 halfway through the last few days' trading range, between 0.8320 and 0.8365. Momentum indicators in the 4-hour chart are neutral-to-bullish, with the Relative Strength Index (14) nearing the 50 midline and the Moving Average Convergence Divergence (MACD) marginally positive. The Doji candles in the daily chart, however, highlight a hesitant market.

Bulls need to breach the October 30 and November 2 highs, near 0.8365 to confirm a deeper correction towards the October 26 high, in the 0.8400 area. On the downside, the area between Tuesday's low at 0.8330 and the late March 2025 lows at 0.8315 is likely to test bearish attempts. Further down, the February 2025 low, near 0.8250, emerges as a plausible target.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

MUFG’s Derek Halpenny argues that the Japanese Yen remains under pressure from structural portfolio and FDI outflows, even as US yields correct and Washington maintains opposition to Yen weakness. He highlights NISA-driven foreign equity buying, demographic-driven FDI trends, and suggests USD/JPY may be near a turning point as policy and rate spreads eventually support the Yen.

Yen weighed by flows and policy

"What we can see once again though is that the reprieve for the yen is marginal (today’s gain is USD-related) with the rates/FX link for the yen still relatively weak."

"Intervention in last July / early August has distorted the link with rates but what the movement of the yen does indicate is that there are still some structural flows that continue to weigh on yen performance and those flows could well be slow to change."

"This expanded NISA limit will likely mean this scale of outflow persists given the erosion of savings held in deposit savings due to higher inflation and given strong equity market returns, in particular in the US."

"The mid-term election results in the US is unlikely to impact the US-Japan relationship and the strong message emanating from Washington over its opposition to the continued weakness of the yen."

"We still suspect the yen is close to a turning point and market rates and/or policies by the government to encourage greater sums of capital to remain in Japan should have a positive impact on the yen."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• The Indian Rupee gains against the US Dollar on the outcome of US midterm elections.
• Democrats win majority in both US Houses.
• ING doesn’t see a structural weakness in the US Dollar due to Democrats' victory.

The Indian Rupee (INR) gains against the US Dollar (USD) on a volatile Wednesday as Democrats have registered victory in United States (US) midterm elections.

As of writing, the USD/INR pair is slightly lower to near 94.65 despite the outcome of US elections weighing on the US Dollar. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.45% lower to near 101.42.

Democrats take control of both Houses

According to Decison Desk HQ, Democrats have won majority seats in both the House of Senate, and the House of Representatives. The scenario of Democrats winning both the House of Representatives and the Senate is expected to have a significant impact on the US Dollar.

ING warned earlier that “fears of tougher regulation could weigh on Artificial Intelligence (AI) stocks (we’ve recently seen how that can hit the greenback), while markets could price in greater risks of decision-making gridlock around issues such as government funding and the debt ceiling.”

However, ING ruled out fears of a structural directional shift in the Dollar, explaining that the greenback “continues to respond predominantly to the Fed story, which shouldn’t face an immediate and direct impact from the midterm result”.

Key US economic releases

This week, investors will pay close attention to key US economic releases, notably Nonfarm Payrolls (NFP) data for October, which will be released on Friday. The NFP data will likely influence Federal Reserve’s (Fed) interest rate expectations significantly.

Ahead of the official US employment data release, financial markets will focus on the US ADP Employment Change data for October, which will be published later in the day at 13:15 GMT. The data is expected to show that the private sector created 69K fresh jobs lower than 90K in September.

Technical Analysis: USD/INR stays below 20-day EMA

In the daily chart, USD/INR trades at 94.65, maintaining a bearish near-term bias as spot holds beneath the 20-day exponential moving average (EMA) at 95.16. The pair has retreated from recent highs and remains capped by this dynamic resistance, while the Relative Strength Index (RSI) around 37 suggests lingering downside pressure, though not yet in oversold territory.

On the topside, immediate resistance is seen at the 20-day EMA near 95.16, and a daily close above this barrier would be needed to ease the current downside bias and allow for a recovery phase. Looking down, the June low at 94.16 is the key support level.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Nomura’s Global Markets Research team, led by Josie Anderson, George Buckley and Andrzej Szczepaniak, reviews the latest Riksbank decision to raise its policy rate to 2.00%. They highlight accelerating CPIF inflation once temporary fiscal measures are excluded, resilient GDP growth, and elevated energy prices as key drivers. The analysts forecast two further 25bp hikes in February and May 2027, taking the rate to 2.50%.

Nomura sees further tightening ahead

"Guidance on future changes in the policy rate was that “if the outlook for inflation and economic activity holds, the Riksbank assesses that it is likely that the policy rate will be raised further in the coming year, in line with the policy rate forecast in September.”"

"We expect CPIF inflation to average 1.8% y-o-y in Q1 2027 before accelerating to 2.6% in Q2 2027, as the base effects from the April 2026 halving of food VAT push up y-o-y inflation."

"The policy rate projection from September implies around a 50% probability of a February 25bp hike, assuming no change in the policy rate in December. The projection then gradually increases over 2027 to a peak of 2.43% in Q1 2028."

"We expect the Riksbank to raise its policy rate by 25bp again in February and May 2027, taking the policy rate to 2.50%, which is still within the range that the Riksbank views as neutral (1.50-3.00%). This would also be fewer hikes than we expect from the ECB in 2026 and 2027 (we expect a total of four hikes to 3.00% – including the two that have already been implemented)."

"We think there are risks to the timing of our Riksbank hiking view – the next two hikes after November could come in March and June (i.e. one month later than we think), when the Riksbank can assess inflation pressures more thoroughly in its forecast rounds.Back-to-back hikes in November and December 2026 seem unlikely with inflation still looking broadly under control."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Gold gains as Democrats’ victory fuels fiscal concerns and revives demand for the metal.
• Expectations of another Fed rate hike in December could limit further gains.
• XAU/USD faces immediate resistance at the 20-day SMA near $4,074, while the RSI recovers toward the neutral level.

Gold (XAU/USD) rallies on Wednesday, reclaiming $4,000 as the US midterm results set the stage for a divided government and raise the risk of political gridlock in Washington. At the time of writing, XAU/USD trades around $4,041, up 3% on the day.

Democrats have seized control of both houses of Congress, meaning the Trump administration will need their support to pass new laws, approve spending packages, introduce further tax cuts or raise the debt ceiling.

The resulting political uncertainty revives the metal’s safe-haven appeal while weighing on the US Dollar, making bullion cheaper for buyers holding other currencies. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.40, down 0.44% on the day and near five-week lows.

Gold rebound comes as US fiscal risks rise but Fed path seen unchanged

The Yellow metal may struggle to sustain its rebound as ongoing tensions in the Middle East keep energy prices high and inflation risks elevated, leaving markets positioned for additional interest rate hikes by the Federal Reserve (Fed) and other major central banks. Higher borrowing costs weigh on the non-yielding metal by increasing the opportunity cost of holding it.

Strategists at Societe Generale argue that the Democrats’ blue wave in the US “should not change the direction of travel for the Fed, at least not in the short term,” with “a 25bp rate increase in December” still seen as “a high probability event.” Meanwhile, the bank’s economics team warns of a greater risk of a government shutdown amid uncertainty over the US fiscal outlook, which may help explain Gold’s rebound above $4,000.

Traders price in an 82% chance of a December rate hike, according to the CME FedWatch Tool. The prospect of further tightening could also cushion the US Dollar’s decline.

Attention now turns to US economic data for fresh clues on the Fed’s policy outlook. Wednesday brings the ADP Employment Change report and October’s ISM Services PMI, followed by weekly Initial Jobless Claims on Thursday and Nonfarm Payrolls (NFP) on Friday.

Technical Analysis: XAU/USD approaches mid-Bollinger Band

On the daily chart, XAU/USD remains mildly bearish in the near term as price holds below the 20-day simple moving average (SMA) middle Bollinger band at $4,074. The pair also faces overhead resistance at the upper Bollinger band near $4,253, suggesting rallies remain capped while momentum stays mixed, with the Relative Strength Index (RSI) recovering to 46 in neutral territory and the Moving Average Convergence Divergence (MACD) indicator negative but stabilizing.

On the downside, immediate support emerges at the $4,000 psychological level, followed by the lower Bollinger Band near $3,894 and the yearly low of $3,870 touched last week. On the topside, a close back above the mid-Bollinger band at $4,074 would ease downside pressure, though stronger resistance waits at the upper band near $4,253 and then the broader structural barrier at $4,400.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• The British Pound refreshes seven-week high at around 1.3500 against the US Dollar.
• Democrats’ victory in both US houses reflects clear discontent of Republican policies by public.
• The BoE is widely anticipated to hike interest rates on Thursday.

The British Pound (GBP) posts a fresh seven-week high at around 1.3500 against the US Dollar (USD) in the European trade on Wednesday. The GBP/USD pair strengthens as the victory of United States (US) Democrats in both houses of Federal law has weighed heavily on the US Dollar.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.47% lower to near 101.40.

The victory of Democrats in both the Senate and the House of Representatives has prompted fears of decision-making gridlock around issues such as government funding and the debt ceiling, and tougher restrictions on Artificial Intelligence (AI) spending, ING reported.

On the economic front, investors shift their focus to the US ADP Employment Change and the ISM Services PMI data for September, which will be published in the North American session.

On the United Kingdom (UK) front, investors await the Bank of England’s (BoE) monetary policy announcement on Thursday.

BoE seen kicking off tightening cycle with modest hike as UK data firms

Strategists at Brown Brothers Harriman highlight Thursday’s Bank of England policy decision and accompanying Monetary Policy Report, noting that the BoE is “widely expected to start tightening with a 25bps hike to 4.00% after standing pat all year.” They point out that “firmer UK inflation and economic activity back the move,” while the anticipated vote split is “seen at 7-2 with doves Alan Taylor and Swati Dhingra supporting a hold,” underscoring that not all policymakers are yet convinced of the need to begin a new tightening phase.

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3473, holding a constructive bullish bias as it extends the rebound above the 20-period exponential moving average (EMA) at 1.3358 and the 50% Fibonacci retracement at 1.3406. Price is now trading just over the 61.8% retracement at 1.3469, hinting at an attempt to reclaim higher ground, while the Relative Strength Index (RSI) at 64 suggests firm but not yet extreme upward momentum.

On the topside, immediate resistance is aligned at the 61.8% Fibonacci retracement at 1.3469, with further barriers at the 78.6% level at 1.3560 and the prior swing high near the 100% retracement at 1.3676. On the downside, initial support is seen at the same 61.8% Fibonacci level at 1.3469, followed by the 50% retracement at 1.3406 and the 20-period EMA at 1.3358; a deeper pullback would expose the 38.2% retracement at 1.3342 ahead of the 23.6% level at 1.3263, while the cycle low around 1.3136 acts as a more distant structural floor.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Commerzbank’s Tatha Ghose expects Poland’s NBP to leave its base rate at 3.75%, despite what he views as underlying inflation risks masked by temporary fuel tax cuts. He warns that administrative interventions should be ignored by monetary policy, and argues that NBP inaction risks leaving Polish policy behind the curve, with the Zloty likely to stay under pressure.

Underlying inflation risks for Zloty

"Poland’s National Bank (NBP) will announce its November monetary policy decision this afternoon: the analyst consensus nearly unanimously forecasts that the base rate will remain unchanged at 3.75%. As usual, tomorrow’s press conference and new NBP projections will hold more interest than today’s rate decision itself."

"Nevertheless, it is worth pointing out that October’s apparent CPI weakness was responsible for delaying rate hikes. But, it should not. Headline inflation slowed to 3.5%y/y from 4.1%y/y in September, but this slowdown occurred only because of well-known administrative fuel-price adjustments (the government lowered VAT on fuel to 8% from 23% and reduced excise duties to EU minimum levels; passenger fuel prices consequently fell by 9.7%m/m). Such a development is temporary tax intervention, not genuine disinflation."

"Monetary policy should ignore such administrative intervention and target the preceding acceleration to above-target underlying inflation. Raw energy and commodity-price pressures remain elevated, the labour market is still tight, and the fuel support is currently scheduled to expire at year-end. The upcoming inflation projections may clarify some scenarios, but cannot resolve uncertainty surrounding future government interventions, regulated tariffs or political developments."

"In our view, NBP’s inaction risks pushing Polish monetary policy behind the curve; the zloty will, therefore, remain under pressure."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• EUR/USD extends its recovery from lows near 1.1100, approaching four-week highs at 1.1280.
• Preliminary data revealed that Eurozone consumer inflation hit three-year highs in October.
• The USD remains on its back foot, weighed down by a sound Democratic victory in the US midterm elections.

The Euro (EUR) accelerates its recovery against the US Dollar (USD) on Wednesday, favoured by the combination of a sound Democratic win in the US midterm Elections and hot Eurozone inflation data. The EUR/USD pair rallied more than 0.6% on the day to reach session highs a few pips shy of the last four weeks' trading range, at the 1.1260-1.1280 area.

Eurozone data released earlier on Wednesday revealed that the preliminary Harmonized Index of Consumer Prices (HICP) accelerated to a 4% year-on-year growth in October, its highest level in three years, from 3.8% in September, fuelled by the fuelled by the high energy prices.

These figures add pressure on the European Central Bank (ECB) to keep tightening monetary policy further over the coming months, and have offset investors’ disappointment about the downward revision to the October HCOB Services Purchasing Managers’ Index (PMI) released earlier in the day.

Trump’s defeat in US midterms punishes the US Dollar

The US Dollar, on the other hand, is struggling amid news of a sound Democratic victory in the US midterm elections held on Tuesday. The Democrats have taken control in both chambers and turned historical Republican strongholds like Kansas and Texas, among others, to their side.

Investors' concerns that the Democrats will implement regulation on the AI sector and put a brake on data center building plans have increased pressure on tech shares and boosted demand for the safe-haven government bonds.

From a different perspective, Rabobank analysts observe the market has interpreted Democratic control of Congress as implying “fewer fiscal giveaways and therefore less inflation,” a combination that “suggests lower yields on Treasuries, which have negative implications for the USD.”