The euro has pushed back above 1.12 as the dollar comes under pressure following the US midterms. The euro is also drawing support from hawkish ECB commentary after last week’s pause, with Joachim Nagel saying a December hike will likely be needed and Dimitar Radev keeping the door open to further tightening. European gas and power prices remain elevated despite the recent pullback in crude, reinforcing the ECB’s concern that higher energy costs could feed into broader inflation. US election results are the immediate focus, with September payrolls later this week the next test for Fed rate expectations and the dollar.

Sterling climbed to its strongest level against the dollar since mid-September, with the rally driven mainly by broad dollar weakness as early US midterm results raised the prospect of gridlock in Washington and Treasury yields moved lower. Hopes for a diplomatic breakthrough with Iran also reduced demand for the dollar as a haven. On the UK side, easing fiscal concerns and expectations of a Bank of England rate hike on Thursday gave the pound additional support. Stronger-than-expected US job openings kept the case for further Fed tightening intact but did little to slow the dollar’s decline. US ADP employment and ISM services are the next tests for the move, ahead of Thursday’s BoE decision and Friday’s US payrolls.

The yen has rebounded from a three-week low as renewed intervention warnings from Tokyo prompted traders to cover short positions and the dollar weakened broadly. Japan’s finance minister reiterated that authorities were prepared to act against disorderly currency moves, while lower Treasury yields as US midterm results rolled in and hopes for a diplomatic breakthrough with Iran weighed on the greenback. The wide US–Japan rate gap still limits the yen’s upside, particularly after stronger-than-expected US job openings reinforced expectations for a December Fed hike. The ADP employment report and ISM services survey are the next tests for Treasury yields and USDJPY.

The Australian dollar rebounded after two days of losses, helped by broad US dollar weakness and lower Treasury yields as US midterm results came in. The RBA’s quarter-point hike to 4.85% offered some support, though the split vote and lack of a clear signal of further tightening limited the lift. Australia’s services and composite PMIs beat expectations but both slipped into contraction in October, while China’s services PMI eased to 50.8, pointing to slower expansion in Australia’s largest trading partner. With Iran peace talks still stalled, the Aussie remains sensitive to swings in global risk appetite.