The US dollar and Treasury yields fell on Wednesday as investors reacted to the Democratic Party's sweep of both the House and Senate in the midterm elections. The greenback weakened against most major currencies, except the euro and the pound, as the prospect of slower growth and reduced inflation concerns dampened expectations for aggressive Federal Reserve rate hikes. The Fed is still seen as likely to raise rates in December, but investors now anticipate only 30 basis points of additional hikes in 2027.
Regulatory concerns and mixed earnings reports weighed on technology stocks, with Wall Street's tech-heavy index slipping overnight before recovering during European trading. AMD's earnings beat forecasts, driven by strong data-center sales, while Apple's stock declined despite solid results due to concerns over higher chip prices and slower service growth. The potential for gridlock in budget and debt-ceiling negotiations also looms, raising the risk of a government shutdown and market volatility in 2027.
Oil prices remained volatile amid geopolitical developments in the Middle East. Prices initially fell on reports of progress in US-Iran negotiations but rebounded after the US struck Iran's Qeshm Island. President Trump indicated no immediate plans for further attacks, leaving oil markets sensitive to any new truce-related headlines. A resumption of talks could push oil prices lower, easing inflation fears and potentially weakening the dollar further.
Gold prices surged above $4,000, rebounding by more than 2.5% following the Democratic election victory. The retreat in the dollar and Treasury yields, combined with risk aversion on Wall Street, boosted gold's appeal. The precious metal is now testing a key downtrend line, with bulls eyeing the $4,100 zone as the next potential resistance level. A break above that could open the door to further gains toward $4,200.