US Dollar steadies on US midterm election day

The US Dollar struggled to find demand on Monday as risk flows dominated the financial markets. Wall Street’s main indexes registered strong daily gains and the US Dollar Index registered its lowest daily close since October 27 before going into a consolidation phase at around 110.50 early Tuesday. Later in the session, Eurostat will release the September Retail Sales data. The US economic docket will feature the NFIB Business Optimism Index for October and the IBD/TIPP Economic Optimism Index for November. Meanwhile, investors will keep a close eye on the US midterm elections.

Republicans need five seats to gain the majority in the House and one seat to control the Senate. The outcome is unlikely to be finalized by the end of the day and some experts think that it could take a few days before we get the final result. In the meantime, US stock index futures are trading flat on the day, reflecting a cautious market mood. The benchmark 10-year US Treasury bond yield holds steady slightly above 4%.

EURUSD climbed to a 10-day high of 1.0035 on Monday but retreated below 1.0000 early Tuesday. On Monday, European Central Bank policymaker Martins Kazaks noted that inflation in the euro area was still a problem and reiterated that they will keep raising rates. “Nobody at the moment can know with any precision where exactly the terminal rate will be,” Kazaks added.

GBPUSD took advantage of the broad selling pressure surrounding the US Dollar and advanced toward 1.1550 late Monday. The pair reversed its direction and fell below 1.1470 in the early trading hours of the European session on Tuesday.

During the Asian session, the Reserve Bank of New Zealand announced that Inflation Expectations for the fourth quarter climbed to 3.62% from 3.07% in the previous quarter. This data failed to help the NZ Dollar preserve its strength and NZDUSD was last seen losing 0.5% on the day at around 0.5900.

AUDUSD turned south after having failed to clear 0.6500 hurdle. The National Australia Bank’s Business Confidence and Business Conditions indexes for October declined to 0 from 4 and 22 from 25, respectively, making it difficult for the Australian Dollar to find demand.

Following Friday’s sharp decline that was triggered by the upbeat Canadian jobs report, USDCAD registered small losses on Monday. The pair stays relatively quiet near 1.3500 early Tuesday. Meanwhile, the barrel of West Texas Intermediate trades in negative territory near $91.50, not allowing USDCAD to gather bearish momentum.

Gold failed to hold above $1,680 on Monday as the 10-year US T-bond yield gained more than 1%. XAUUSD trades modestly lower on the day at around $1,670.

Bitcoin extended its slide as sellers took action when it dropped below the key $20,000 mark. Although BTCUSD managed to retrace a small portion of its daily slide, it still trades below $20,000, losing nearly 4% on the day. Ethereum dropped below the lower limit of its two-week-old range at $1,500 and was last seen losing 5% on the day at $1,480.

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