US midterm results batter US Dollar Index (DXY) as it revisits four-week lows

Selling pressure takes the US Dollar Index to four-week lows of 101.25 on Wednesday, extending its decline with a 0.6% drop.
Wednesday’s sharp US Dollar sell-off follows a landslide win for the Democratic Party.
Yields and the USD have come under pressure as worries over AI regulation drive investors out of equities and into the safety of US Government Bonds.

Selling pressure has left the US Dollar (USD) trailing all other major currencies on Thursday after US President Donald Trump’s midterm election defeat. At the time of writing, bears are making another push towards support around 101.25, with the US Dollar Index (DXY) down 0.6% on the day. The index tracks the USD’s value against six major currencies.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Tuesday’s elections handed the Democrats control of the US Congress as well as the more closely contested Senate, inflicting a historic defeat on the Republican Party. The Republicans lost traditional strongholds including Texas, Kansas and North Carolina, where they had governed for decades.

The election result triggered selling in technology shares. During the Asian session, fears that the Democrats would pursue stricter AI regulation and halt most data centre construction plans dealt another blow to the sector, while demand for safe-haven government bonds strengthened. Following the results, the 10-year note’s yield fell by as much as 10 pips, placing further downward pressure on the USD.

ING: Does overnight price action offer a preview of markets in 2027?

The wait until January for the Democrats to take office may have reassured investors and limited further US Dollar losses, according to ING’s Chris Turner. Nevertheless, he cautions that “overnight price action could provide a preview for markets in 2027,” arguing that “A Democratic Congress would be a mild dollar negative – both in terms of what it would mean for the AI story and the prospect of a prolonged US government shutdown.”

Against this backdrop, the ING Analysis Team expects US Dollar bears to remain constrained by “a still-resilient US economy and at least one more rate hike from the Federal Reserve.”

Attention will therefore turn to the US ADP Employment Change and ISM Services Purchasing Managers’ Index (PMI) releases later in the day. Friday’s Nonfarm Payrolls (NFP) report, however, remains the week’s main event. Unless next Friday’s report points to a strong labour market, doubts over the US economic outlook could deepen, putting additional pressure on the USD.

Economic data in focus

What does ADP Employment Change measure?

Released by Automatic Data Processing Inc., the largest payroll processor in the US, ADP Employment Change tracks changes in the number of people employed in the US private sector. An increase generally supports consumer spending and stimulates economic growth. A high reading is therefore traditionally regarded as bullish for the US Dollar (USD), whereas a low reading is considered bearish.

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Next scheduled release: Wed 04 Nov 2026 13:15

Release frequency: Monthly

Consensus estimate: 69K

Previous reading: 90K

Data source: ADP Research Institute

Why does it matter to traders?

An ADP employment reading above consensus tends to support the USD. Traders often view the employment report from ADP, America’s largest payrolls provider, as a precursor to the Bureau of Labor Statistics’ Nonfarm Payrolls release, usually published two days later, given the correlation between the two. Although the two data series track each other closely overall, individual months can show substantial differences. FX traders also monitor ADP for the same reason they watch the NFP: sustained, robust employment growth adds to inflationary pressures, making the Fed more likely to raise interest rates.

Which Economic Indicator Is in Focus?

What Does the ISM Services PMI Measure?

For the US Dollar (USD), an ISM Services Purchasing Managers Index (PMI) reading above 50 is a bullish signal, indicating that the services economy is generally expanding. Below 50, the reading points to a broad decline in services activity and is viewed as bearish for USD. Published monthly by the Institute for Supply Management (ISM), the index is a leading gauge of business activity in the US services sector, which accounts for most of the economy. It draws on a nationwide survey of supply executives, who respond using information gathered within their own organisations. Their responses indicate whether conditions have changed in the current month compared with the previous month.

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Upcoming release: Wed 4 Nov 2026 15:00

Release frequency: Monthly

Consensus estimate: 54.8

Prior reading: 54.9

Data source: Institute for Supply Management

Why Should Traders Track This Release?

Stronger-than-expected readings of the Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) typically support the USD against other currencies. The index gauges conditions across the US services sector, historically a major contributor to GDP, with a reading above 50 signalling expansion in the sector’s economic activity. Investors also pay close attention to the Employment Index and Prices Paid Index alongside the headline PMI, as these offer valuable indications of labour market conditions and inflation.