Dollar firms as midterm votes are counted; Aussie slips after RBA hike

The dollar ticked up as US midterm results began to arrive, according to Investing.com. The Australian dollar slipped even after a Reserve Bank of Australia rate hike, and weak New Zealand jobs data added pressure on the antipodean currencies.

Since our last recap, the story has moved from the US data beats to the vote count, a fresh New Zealand labour report and new reports of possible US military action against Iran.

Midterm results start to move betting markets

Early counting in Kentucky showed a large swing towards Democrats, investingLive reports. In Anderson County, the Republican candidate led by 19 points. In the prior three House elections, the Republican won that county by 48, 54 and 54 points. investingLive put the swing at around 35 points and said betting markets were moving.

The signals from prediction markets were mixed through the day. investingLive's Americas wrap said prediction markets saw Democrats taking control of both the House and the Senate. Earlier, the same outlet noted a modest shift towards Republicans in Senate odds, but called it likely variance in a thin market. For how crypto traders reacted to the early count, see our sister site's report on Bitcoin as midterm results rolled in.

Iran strike risk returns

investingLive reports that The New York Times cites US officials saying the US military could resume major combat operations against Iran as early as Wednesday. The outlet noted that oil has fallen this week and argued that Trump may have been sending false signals to lower oil prices ahead of the vote. This cuts against last week's deal hopes and puts oil-sensitive currencies back in focus.

Aussie and kiwi under pressure

New Zealand's Q3 unemployment rate rose to 5.7%, above the 5.5% expected and the 5.6% prior, investingLive reports. The outlet said the miss on every major measure is likely to weigh on the kiwi and trim pricing for a December RBNZ hike. It added that the gap between the RBNZ and a more hawkish RBA looks set to widen.

In the 3 November ECB fixings, AUD/USD fell 0.35% to 0.6984, the weakest of the majors. NZD/USD has dropped 1.38% over the last five fixings. Chart: AUD/USD on TradingView.

The majors: ECB reference rates, 3 November

These are official ECB fixings from 3 November, compared with the 2 November fixing. They are not live quotes and predate the overnight news above.

The Mexican peso was the standout gainer against the dollar in the fixing.

Central banks and data in the news

• Bank of Canada: Governor Macklem said there could be a need to raise the policy rate further, according to investingLive's wrap.
• ECB: Bundesbank President Nagel said a December rate hike is very likely to be necessary, the same wrap reports.
• Bank of England: Investing.com reported the pound edged up with a BoE hike in view.
• Canada-US trade: Prime Minister Carney said trade talks with the US will intensify, investingLive reports. The outlet said any easing of the 50% US tariff would support the loonie, but with no timeline, USD/CAD is likely to stay more sensitive to the midterm results and oil for now.

What to watch next

1. Final US midterm results for the House and Senate, and how prediction markets react.
2. Whether the US resumes military action against Iran, which the NYT report says could come as early as Wednesday.
3. Repricing of a December RBNZ hike after the jobs miss, and the RBA-RBNZ policy gap.
4. The Bank of England decision, with a hike in view according to Investing.com.
5. Further ECB and Bank of Canada commentary on more tightening, and any progress in Canada-US trade talks.