EUR/USD jumps to session highs on retreating US dollar

The dollar dives with all eyes on the US mid-term elections. So, the euro has squeezed higher on Tuesday’s US trading to hit session highs at 1.0550 with the US dollar dropping suddenly versus rivals. From a wider perspective, however, the pair has been moving without a clear direction, both sides of the parity level, with the investors adopting a more cautious stance.

Appetite for risk diminished on Tuesday as the markets await the outcome of the US mid-term elections. The definitive results of the elections are likely to draw out for some days but initial polls are suggesting a Republican victory that would trigger a Congress jam.

The foreseen Republican victory is likely to complicate the approval of the fiscal stimulus measures expected to be launched next year, which would ease pressure on the Fed to ramp up interest rate hikes.

The US dollar has rallied across the board this year, appreciating beyond 10% against the euro, fuelled by the Federal Reserve’s aggressive monetary tightening cycle. With market developments feeding speculation about the end of that cycle, the US dollar might start to give away gains.