Euro to Dollar Forecast: US Midterms Democrat Sweep Put USD at Risk

Modified: Monday, 2 November 2026 09:31 BST - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: US Midterms Democrat Sweep Put USD at Risk

The Euro to Dollar exchange rate (EUR/USD) has recovered modestly after falling to 17-month lows near 1.1100, with investors preparing for Tuesday's US midterm elections amid renewed turmoil in energy and technology markets.

Crédit Agricole warns that a Democratic sweep of Congress could weigh on the Dollar, although expectations of further Federal Reserve tightening and persistent French fiscal concerns continue to favour the US currency in the near term.

EUR/USD Forecasts: Democrat clean sweep?

BNP Paribas is forecasting the Euro to Dollar (EUR/USD) exchange rate will secure a limited net recovery to 1.14 at the end of this year with a further advance to 1.20 at the end of 2027.

According to BNP; “We expect Fed hikes to temporarily offset structural headwinds and support the dollar before the dollar's structural downtrend resumes toward 1.20 by end-2027, although political and fiscal risk may weigh on the euro next year.”

Danske Bank maintains a 12-month EUR/USD forecast of 1.10.

EUR/USD dipped to 17-month lows near 1.11 during the week before a slight recovery with further major stresses across asset classes.

There were further gains for oil prices with Brent at 5-month highs which tended to support the dollar. There was also a sharp sell-off in tech shares amid heavy losses in the AI sector which could undermine the US currency.

The Federal Reserve held interest rates at 4.00% with a 10-2 vote. Markets are still backing further hikes. Danske Bank commented; “We still call for two more hikes in December and March and maintain our bearish view on EUR/USD.”

The US will hold the mid-term elections on November 3rd. There are strong expectations that the Democrats will regain control of the House of Representatives. There are expectations of a tight race for the Senate with the possibility that the Democrats will be able to wrestle control.

According to Credit Agricole; “we analysed the USD performance after US elections since 1976 and concluded that the FX market impact depended on whether Democrats controlled the House only, or the Senate as well. In the case of the former, the USD rebounded strongly while it sold off in the case of the latter.

The bank added; “Assessing the FX impact from the midterms is further complicated by two seemingly conflicting USD drivers that could play out sequentially in the coming months. In the immediate aftermath of the vote, investors will focus on any indication that the Trump administration would re-escalate the conflict in Iran and thus boost the appeal of the high-yielding, safe-haven King USD across the board.”

There are still important concerns surrounding the Euro area with fears surrounding French bonds while riots have spread to other countries including Germany.

Barclays commented; “The Euro's appeal as then "anti dollar" was already beginning to fade following the September Fed rate hike, but has received a further blow from the recent sharp widening in OAT spreads.”

The ECB held the deposit rate at 2.50% with the meeting overshadowed by the resignation of bank President Lagarde.

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TAGS: Euro Dollar Forecasts