US elections could change the situation on the currency market
On the FOREX currency market, the euro continues to trade under the influence of the American economic and political agenda. One of the main events for currency traders today, November 3, 2026, is the midterm elections to the U.S. Congress. Their results may affect not only the internal political situation in America, but also the prospects for the dollar, and consequently the euro/dollar exchange rate (EUR/USD).
The main intrigue is whether the Democrats can gain a majority in one or both chambers of Congress or whether the Republicans will manage to maintain control over the legislative branch.
How the euro reacts to election uncertainty
As of Tuesday morning, the EUR/USD pair is trading slightly below the 1.1200 mark. On the eve, the euro retreated from a local high around 1.1235. The dollar received support thanks to fairly strong American statistics: the ISM Manufacturing business activity index for October rose to 55.5 points against 54.5 points a month earlier.
An additional factor supporting the American currency remains expectations regarding the further policy of the Fed. The market allows the possibility of a rate hike in December, which makes the dollar more attractive to investors. The euro, in turn, is under pressure due to France's debt problems and political uncertainty in the eurozone's largest economy.
What the results of the U.S. Congressional elections will change
For the currency market, three possible scenarios are especially important.
1. A Democratic victory and gaining a majority in both chambers of Congress.
Such an outcome may put moderate pressure on the dollar. The Democrats will be able to more actively limit Donald Trump's economic program, impede the implementation of individual tax initiatives, and strengthen oversight of the administration's actions.
For the euro, this is a potentially positive scenario: a weakening dollar may push EUR/USD upward. However, the effect may not necessarily be long-lasting, since much will depend on future Fed decisions and the state of the American economy.
2. The Democrats gain the House of Representatives, the Republicans retain the Senate.
This is one of the most likely options. In that case, a situation of divided control over Congress will arise in the U.S.
For the dollar, the consequences may be ambiguous. On the one hand, limiting the Trump administration's ability to carry out large-scale economic reforms may reduce expectations of fiscal stimulus. On the other, political confrontation may increase uncertainty and force investors to seek safe-haven assets.
For the euro, this means a likelihood of heightened volatility without a clear long-term direction.
3. The Republicans retain a majority in both chambers.
Such an outcome could be a surprise for the markets and initially support the dollar. The Trump administration would have more room to implement tax initiatives, increase government spending, and continue economic deregulation.
If investors begin to expect faster economic growth and higher inflation in the U.S., yields on American bonds may rise. This could strengthen the dollar's attractiveness and create additional pressure on EUR/USD.
However, an increase in budget spending may simultaneously heighten concerns about the American government debt, which in the long term could play against the dollar.
Forecast for the euro
In the coming days, the midterm election results may become one of the main sources of EUR/USD fluctuations. It is important to consider that the currency market will assess not only the voting result itself, but also its consequences for U.S. fiscal policy, trade relations, and the independence of the Federal Reserve.
Additional attention of investors will be directed to American labor market statistics, the publication of preliminary inflation data for the eurozone, and further signals from the Fed regarding interest rates.
The baseline scenario for the coming days is heightened volatility for the euro and the dollar. If the Democrats indeed gain control of at least one chamber of Congress, part of the negative expectations regarding the dollar may already be priced into quotations. Therefore, one should not expect an automatic and sharp rise in the euro.
For a sustainable strengthening of the European currency, not only a political weakening of the dollar is required, but also an improvement in the economic prospects of the eurozone.
