Close this search box.

Explore the world.

Assess underlying fundamentals and market conditions in the world's major economies.


Stay ahead.

Follow the biggest stories in markets and economics in real time.

Connect with us.

Learn more about Corpay Cross-Border and the currency research team.


Get insight into the latest trends and developments in global currency markets with breaking news updates and research reports delivered right to your inbox.

After signing up, you will receive regular newsletters from Corpay, and may unsubscribe at any time. View Corpay’s Privacy Policy

Market Briefing: Currency markets enter pre-midterm lull

US equity indices are pointing to marginal gains and the dollar is holding steady ahead of today’s midterm elections and a critical October inflation report later in the week. The euro is clinging to parity, the pound is tightly rangebound, and the yen is inching higher as we go to pixels.

Both global oil benchmarks are up more than 3 percent on the day, with Brent challenging the $100 mark as seasonal imbalances interact with Russian sanctions and OPEC+ production cuts to drive prices higher. Overall global demand has weakened by more than expected in recent months, but inventories are drawing down and traders are turning bullish as they position for a rebound in Chinese consumption.

We don’t think the specific outcome of the mid-term elections will have any lasting impact on currency markets – but the prospect of an extended period of political stasis could boost risk sentiment more broadly.

Investors expect the Republicans to win a majority in the House of Representatives, with races in Georgia, Nevada, and Pennsylvania making the Senate look like a close call. Markets generally welcome the relative predictability that comes with a gridlocked political system, and a move into risk-sensitive assets could cause the dollar to fall slightly if a “red wave” takes place.

Despite public perception to the contrary, Republican presidents have historically tended to increase deficits by more than their Democrat brethren, but a political stalemate should mean that both parties find their worst impulses are kept in check. This could lower inflation expectations, but might also mean counter-cyclical fiscal policy becomes tougher to deploy in a downturn.

A Republican sweep will make a standoff over the debt ceiling more likely next year – but could also focus minds on the Democrat side, causing them to take action before the new Congress is sworn in.

The US dollar appears to be reversing direction more broadly. Traders are betting global inflation will fade, that China’s “covid-zero” policy is on its last legs, and that the ultimate destination for US rates is now largely priced in – giving the greenback less potential in relative terms.

The near-term outlook for the Canadian dollar is brightening as investors upgrade the likelihood of a “soft landing” in the US and global economies. A move toward the 1.30 mark could be in the offing in the coming weeks, although longer-term vulnerabilities – high household debt, slowing growth, and a less-hawkish central bank – should begin to pull the currency back around year end.

But market momentum could break down if US inflation tops expectations on Thursday. Major unknowns still exist around food and energy price dynamics, and demand and supply conditions in other major spending categories are fluctuating in unpredictable ways. Markets expect headline inflation to come in at 7.9 percent year-over-year, and a stronger print could trigger a dollar resurgence.

Karl Schamotta, Chief Market Strategist

Nvidia Earnings Top Estimates, Markets Surge
Fed Worried About Cutting Too Soon
Markets Mark Time Into Fed Minutes, Nvidia Earnings
AUD recovery continues
Canadian Inflation Decelerates Sharply in January
Dollar Steadies As Rate Cut Consensus Falters