Silver Price Forecast: XAG/USD rallies vertically as Democrats take control of Houses
Silver price (XAG/USD) surges almost 4% to near $51.85 in the European trade on Wednesday. The white metal rallies vertically after the outcome of United States (US) midterm elections, in which Democrats have won majority seats in both Houses of Federal law.
On Wednesday, November 4, the US Dollar (USD) experienced a downturn as markets evaluated the results of the recent US midterm elections. The European economic calendar presented preliminary inflation data from the Eurozone, while the United States awaited ADP Employment Change and the Institute for Supply Management's Services Purchasing Managers Index (PMI) figures.
The USD showed vulnerability against the Swiss Franc, with the heat map illustrating percentage changes of major currencies against each other, indicating USD's weakest position.
The Democratic Party secured both the Senate and the House in the midterm elections, granting them control over the US Congress during Donald Trump's final two years in office. President Trump attributed Republicans' defeat partly to the ongoing Iran war and confirmed no intention to change his administration's personnel, as reported by the Wall Street Journal.
Initial market reactions to the election results saw mixed outcomes for US stock index futures, with the USD Index remaining in negative territory around 101.50 and the 10-year US Treasury bond yield staying on the lower end below 4.95%.
Commerzbank analysts cautioned that "US equities, and the more tech-heavy Nasdaq in particular, are likely to come under pressure today," attributing the Dollar's recent strength to enthusiasm surrounding US equities and capital inflows. They expressed potential for further weakness in the USD as equity-driven support wanes. Should American political discourse return to a constructive tone, Commerzbank surmised, this may alleviate political risk premium embedded in the USD, providing the currency with structural support over the long haul.
As the immediate market reaction unfolded, gold gained from the broad USD weakness, surging more than 2% and trading above $4,000. In Asian trading hours, New Zealand's unemployment rate for the third quarter rose to 5.7% from 5.6%, higher than the market's forecasted 5.5%. Despite the disappointing labor market data, the New Zealand Dollar (NZD) strengthened against the USD, trading slightly above 0.5600, up about 0.4% for the day.
EUR/USD reached a fresh two-week high of 1.1250 earlier in the day but then retreated to around 1.1230, erasing some of its gains. The Harmonized Index of Consumer Prices (HICP) is projected to increase by 4% over the year, following the 3.8% rise seen in September.
The GBP/USD pair continued its six-day winning streak, trading above 1.3450 since mid-September. The Bank of England (BoE) is expected to announce a 25 basis points rate hike on Thursday. USD/JPY experienced a sharp decline during the Asian trading hours but managed a rebound later, trading slightly above 158.00, still down about 0.4% for the day.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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