EUR/USD edges 'modestly' higher on Democratic clean sweep, Euro remains weighed down

EUR/USD traded modestly higher during Asian trading as it became clear that the base case of a Democratic clean sweep was coming to pass.

Again, however, we do not see this as the catalyst for a sudden directional shift in the common currency. Rising European energy prices, French political woes and the path of ECB rates matter far more.

For now, the common currency appears unable to shake the premium associated with both higher oil prices and the rising political risk, and neither are unlikely to go away soon given the lack of progress in Iran war and French budget talks respectively.

Preliminary October inflation data will be released this morning, and ECB President Lagarde will be speaking on Thursday. We will be looking closely for any signs of second-round inflation effects in the underlying data, which will be the main litmus test as to whether or not further monetary policy tightening will be required in 2027. Retail sales data for September and a public appearance from ECB Chief Economist Lane will round out the week on Friday.