The US dollar index held steady at 101.8 on Tuesday, recovering from the volatility seen in the previous session. Investors adopted a cautious stance ahead of the US midterm elections, which are shaping up to be a pivotal moment for the nation's political landscape.
Prediction markets currently suggest a 74% likelihood of the Democratic Party securing control of the US Senate. This comes as President Donald Trump and the Republican Party face mounting pressure due to rising energy prices, which have been exacerbated by the ongoing Iran conflict.
Market participants are also closely monitoring the upcoming US jobs report, set to be released later this week. The report is expected to offer valuable insights into the labor market's health and could influence expectations regarding the Federal Reserve's monetary policy. Currently, markets are pricing in a 73% chance of a Fed rate hike in December, following a pause in October.
Geopolitical developments in the Middle East continue to impact currency markets. Falling oil prices, driven by signs of diplomatic progress between the US and Iran, have reduced demand for the dollar as a safe-haven asset.