- Strong jobs data bolstered the US dollar.
- The weakening of Donald Trump’s administration is a positive for the greenback.
The US dollar recorded its best daily performance since the September FOMC meeting, when the federal funds rate was raised. This time, the main drivers were an impressive 165K increase in nonfarm payrolls and a fall in the unemployment rate from 4.2% to 4.1%. The labour market is in strong shape, which allows the Fed to continue its cycle of monetary tightening.
CME derivatives indicate a 76% probability of a rate rise in December, up from 66% prior to the October employment report. The probability of two monetary policy tightening moves within the next 12 months has risen from 52% to 63%. The slump in EURUSD could have been even more severe had it not been for the subdued inflation forecasts. Based on October’s figures, Bloomberg analysts expect consumer prices to slow from 0.6% to 0.3%, and the core inflation rate from 0.3% to 0.2% on a month-on-month basis. No year-on-year figures will be published due to the absence of October 2025 data caused by the government shutdown.
Investors continue to digest the results of the midterm elections. Stock indices and oil prices have stabilised, while the US dollar has strengthened significantly. The prices of these assets had incorporated what is known as the Trump premium. Expectations of an escalation of the conflict in the Middle East following the midterm elections had pushed Brent to six-month highs. The Democrats’ victory brought Brent crude back down to earth. The same applies to the S&P 500, which had been rising in 2026 partly thanks to the Trump put. The Republicans’ defeat became one of the reasons to sell US shares.
The US dollar, by contrast, was not popular in the White House. The President has repeatedly asserted that the strength of the greenback undermines the competitiveness of American manufacturers. Given the differing paces of monetary policy between the Fed and the ECB, the divergence in economic growth between the United States and the eurozone, and the French budget crisis and American exceptionalism, EURUSD should have been trading significantly lower.
Donald Trump’s dissatisfaction with the strong currency and high interest rates acted as a restraint on the bears. The Democrats’ victory in the midterm elections undermines the US President’s authority and provides a tailwind for the dollar.
The FxPro Analyst Team