United States Dollar Index holds steady near 102.00 ahead of US midterm elections

On Tuesday, November 3, the financial markets remained cautious as the United States held its midterm elections. The focus shifted to economic data released later in the day, including September Factory Orders and JOLTS Job Openings. The US Dollar (USD) experienced modest bearish pressure throughout the week, with the USD Index reaching its lowest level in a month near 101.40 during European trading hours.

The Institute for Supply Management's Manufacturing Purchasing Managers Index (PMI) data, however, proved to be better-than-expected, lending some support to the USD.

Throughout the day, the USD Index fluctuated within a tight range above 101.70, while US stock index futures experienced losses of between 0.1% and 0.5%. The USD was the weakest against the Swiss Franc throughout the week.

Commerzbank's Norman Liebke noted that the US midterm elections were taking place on Tuesday, with early results expected shortly after midnight CET. If only the House of Representatives changed hands, the Dollar might face some headwinds, but if Republicans retained control of both chambers, it could provide support for the Dollar.

Meanwhile, the Reserve Bank of Australia (RBA) raised the policy rate by 25 basis points to 4.85% from 4.6% due to revised inflation outlook and ongoing upside risks. RBA Governor Michele Bullock stated that further tightening of financial conditions was necessary to support inflation returning to target. Following the RBA's decision, the Australian Dollar (AUD) traded at a two-week low below 0.7000 against the US Dollar early Tuesday.

Oil prices dropped sharply on Monday as hopes grew for a diplomatic solution between the US and Iran after US Vice President Kamala Harris reported progress in indirect peace talks. However, the news of US military strikes against Iranian targets in the Strait of Hormuz raised concerns about a potential escalation of the conflict, causing oil prices to rise early Tuesday.

Euro, US Dollar, and British Pound pairs showed mixed movement during the European trading hours on Monday, with EUR/USD reaching a high of 1.1250 before retracing much of its daily gains. By early Tuesday, EUR/USD traded sideways below 1.1200. The British Pound remained relatively stable near 1.3400 after four consecutive days of gains, before consolidating in the American session.

New Zealand's third-quarter employment data would be closely watched during the early trading hours of Wednesday. Meanwhile, gold rebounded nearly 2% on Monday, but struggled to maintain its recovery and fell about 1% on Tuesday.