The dollar weakened against major currencies on Wednesday, November 4, US Treasuries rallied and artificial intelligence stocks fell after the Democratic Party won control of both the House of Representatives and the Senate in the midterm elections. The dollar index (DXY) was down 0.52% at 101.32, according to FXStreet, and the 10-year Treasury yield slipped 3 basis points to 4.92%, according to CNBC and Reuters.
Wall Street futures, which fell as much as 2% overnight, turned positive before the open, Reuters reported. This article gathers the figures from early Wednesday, before trading began in New York (9:30 a.m. Eastern, 11:30 a.m. in Chile), and what analysts are saying. The vote results are in our article on the US midterm elections.
How markets reacted after the Democratic win
Investors read an opposition-controlled Congress as a limit on President Donald Trump's agenda for his remaining two years. "The blue wave means the federal government is sure to be divided on most issues," said Deborah Cunningham, chief investment officer for global liquidity at Federated Hermes, quoted by Reuters.
101.32
Dollar index (DXY)
−0.52% on the day, 04:20 GMT
4.92%
10-year Treasury yield
−3 basis points
US$ 1.133
Euro
+0.4% against the dollar
18.66
Mexican pesos per dollar
early November 4; 18.83 on the 3rd
Source: FXStreet, CNBC, Reuters and The Rio Times; figures from early November 4.
View the data as a table
| Dollar index (DXY) | 101.32 · −0.52% on the day, 04:20 GMT |
| 10-year Treasury yield | 4.92% · −3 basis points |
| Euro | US$ 1.133 · +0.4% against the dollar |
| Mexican pesos per dollar | 18.66 · early November 4; 18.83 on the 3rd |
| Asset | Level | Move | Source |
|---|---|---|---|
| Dollar index (DXY) | 101.32 | −0.52%; one-month low | FXStreet |
| 10-year Treasury | 4.92% | −3 basis points (low of 4.89%) | CNBC, Reuters |
| 30-year Treasury | 5.29% | −3 basis points | CNBC |
| 2-year Treasury | 4.61% | Little changed | CNBC |
| Euro | US$ 1.133 | +0.4% | Reuters |
| Pound sterling | US$ 1.348 | +0.5% | Reuters |
| Dollar against the yen | 158.12 yen | −0.4% | Reuters |
| Brent crude | US$ 103.17 a barrel | −0.4% | Reuters |
| Gold | Close to US$ 4,050 an ounce | Higher | FXStreet |
The bond move reflects a search for safety and the expectation that a divided Congress will curb new spending. "Bonds are coming out as the clear winner as markets put the AI trade on the chopping block," said Prashant Newnaha, senior rates strategist at TD Securities in Singapore, quoted by Reuters. The figures in this table were taken at different times overnight and may change once New York opens.
The Mexican peso and Latin American currencies after the Democratic win
The Mexican peso went into election day under pressure. On Tuesday, November 3, it lost 1.40% and Banxico reported an interbank rate of 18.83 pesos per dollar, with a daily range of 18.60 to 18.86, according to Publimetro. The Colombian peso (−1.51%) and the Brazilian real (−1.11%) also fell that day. Gabriela Siller of Grupo Financiero BASE attributed the drop to investor nerves ahead of the result.
Once the results were known, the Mexican currency recovered: early on Wednesday it traded at 18.66 per dollar, while the Brazilian real held near 5.49, according to The Rio Times. The peso matters because of how much Mexico trades with the United States, as we explained in what is at stake for Mexico in the midterms.
Before the vote, Monex had laid out three exchange-rate scenarios. A Democratic win in both chambers, to which it gave a 68% probability, implied a peso appreciation of 1.0% to 2.5%, according to Investing.com.
| Monex scenario (October 30) | Probability assigned | Expected exchange rate after the vote |
|---|---|---|
| Democrats win both chambers | 68% | 18.10 to 18.37 pesos per dollar |
| Divided Congress | 27% | 18.37 to 18.65 pesos per dollar |
| Republicans keep Congress | 5% | 18.84 to 19.21 pesos per dollar |
The first scenario came true, but the peso's early-Wednesday level (18.66) was still above that range. The scenarios are one bank's estimates, not an official forecast. The other factor this week is the Bank of Mexico: its policy rate stands at 6.50% and it announces its decision on Thursday, November 5; three of the five board members have signaled openness to further cuts, Publimetro noted.
Why artificial intelligence stocks fell after the Democratic win
The biggest overnight drop came from AI-related companies, which have led the stock market's gains. The fear is that the new Congress will slow the data center buildout or tighten regulation of the sector, CNBC explained. In Europe, Tesla and SpaceX shares fell between 4.5% and 5% on the Tradegate platform, compared with declines of 0.3% to 0.9% for other Big Tech names, according to Reuters.
| Analyst | Firm | What they said |
|---|---|---|
| Jake Dollarhide | Longbow Asset Management | A Democratic sweep would put pressure on tech and could bring regulatory pressure on everything AI. |
| Jesper Koll | Monex Group (Tokyo) | AI momentum had already turned negative, with or without a Republican majority. |
| Nick Ferres | Vantage Point Asset Management | Goldman Sachs' broad AI index fell 15% in October and more than 24% from its peak; the size of the margin matters. |
| Michael Arone | State Street Global Advisors | The big risk is not the blue wave but investors overreacting to it. |
| Christopher Hodge | Natixis | Economically, the direct implications are not huge. |
The quotes come from the roundup of reactions published by Reuters. Not everyone sees a lasting hit: Kathleen Brooks of XTB said chipmakers, "the backbone of the AI trade", could brush off concerns about AI regulation.
What a Democratic Congress means for markets in the United States
With both chambers in Democratic hands, the president will need deals to pass budgets and laws, and the opposition will be able to investigate the administration through its committees. Trump said he would work with Democrats but also use his veto, according to live coverage by CBS News. For markets, that usually means fewer abrupt fiscal policy changes.
- Spending and debt: a divided Congress tends to block new spending packages, which supports bonds.
- Tariffs: Congress has less direct control over tariffs, which the president imposes by executive order and national security laws.
- Technology: AI and data center regulation is now the main risk for stocks.
- Dollar: analysts disagree about its medium-term path; for now, the reaction was lower.
Natixis' Christopher Hodge summed up that "economically, we still don't think the direct implications are huge," according to Reuters. Mark Malek of Siebert Financial expected "a little bit of volatility" on Wednesday, "but I don't think it's that crazy." For Latin American investors, the next markers are Wall Street's open on Wednesday and Banxico's decision on Thursday.
Frequently asked questions
What happened to the dollar after the midterm elections?
It weakened: the DXY index was down 0.52% at 101.32, a one-month low, according to FXStreet. The euro rose to US$ 1.133.
How did the Mexican peso react?
After losing 1.40% on Tuesday and ending at 18.83 per dollar according to Banxico, it traded at 18.66 early on Wednesday, according to The Rio Times.
Why did artificial intelligence stocks fall?
On fears that the new Democratic Congress will tighten AI regulation and slow the data center buildout. Tesla and SpaceX fell between 4.5% and 5% in Europe.
Did US bond yields rise or fall?
They fell: the 10-year yield dropped 3 basis points to 4.92%, and the 30-year stood at 5.29%, according to CNBC.
