The euro strengthened against the US dollar during Asian trading on Wednesday (November 4, 2026), with the EUR/USD pair hovering around the 1.1240 level and approaching the psychological 1.1250 mark. This gain for the European currency was bolstered by a weakening US dollar, driven by uncertainty surrounding the outcome of the US midterm elections. Investors are exercising caution ahead of clarity on the composition of the US Congress, while market attention is also focused on several key economic data releases scheduled for this week.
The US midterm elections have taken center stage, as the results could influence the direction of economic policy under President Donald Trump’s administration. Early projections from US media indicate that the Democratic Party has managed to retain several Senate seats, including a victory for Senator Jon Ossoff in Georgia. However, the battle for control of Congress remains ongoing, with the Democrats needing a net gain of four seats to take charge of the Senate. This uncertainty has led investors to consider potential shifts in fiscal policy, taxation, and government spending—all of which could impact the trajectory of the US dollar.
In Europe, the euro’s strength has been further supported by comments from European Central Bank (ECB) officials, who have signaled the possibility of an interest rate hike in December. ECB Governing Council member Joachim Nagel stated that a deteriorating inflation outlook makes further monetary policy tightening increasingly necessary. This follows the ECB’s decision to hold rates steady at its previous meeting, which came after two consecutive hikes implemented since the onset of the conflict involving Iran. This hawkish stance has fueled expectations that interest rates in the Eurozone could rise further to curb price pressures.
Inflationary pressures in the Eurozone remain a concern, as high energy costs—stemming from the conflict in the Middle East—threaten to drive up the prices of goods and services. Several ECB officials believe that rising energy prices could spill over into production costs and fuel demands for higher wages, making inflation increasingly difficult to contain. Economists anticipate that the ECB will raise interest rates again in December, while market participants are considering the possibility that monetary tightening could persist through 2027. Meanwhile, investors are also awaiting the U.S. labor market report, which may provide insight into the strength of the economy and the future policy outlook of the Federal Reserve (the Fed).
Newsmaker notes that the strengthening of the euro reflects a combination of a weaker dollar—driven by political uncertainty in the U.S.—and growing expectations for ECB interest rate hikes. Should the ECB maintain a firm stance against inflation, the EUR/USD pair could potentially extend its gains toward the 1.1250 level and test even higher ground. However, this upward momentum remains at risk if U.S. labor data reveals an economy stronger than anticipated, which would bolster expectations for further interest rate hikes by the Fed. Consequently, the short-term trajectory of the euro will largely depend on the outcome of the U.S. elections, the monetary policies of both central banks, and the release of upcoming economic data.