FX Daily: Blue wave price action a preview of what’s to come
The ING FX desk reads the overnight blue-wave price action as a preview of the 2027 dollar regime: short-dated US rates and the dollar sold off, equities reclaimed 2-3% losses, and USD/CHF and USD/JPY reversed roughly half of their 1% early-Asia declines, per the full note from ing-think. The desk's core point is that a Democrat-controlled Congress is unlikely to slow AI capex in the near term, so the initial risk-off impulse has already faded — but the episode establishes the template for how markets will trade political headlines into 2027. Against that, our cross-firm consensus for EUR/USD sits at 1.1500 Dec-26 (spot 1.1253), with USD/CHF at 0.7800 and USD/JPY at 156.00, so the desk's dollar-negative framing is directionally consistent with consensus but stops well short of the more hawkish dollar calls. No high-impact events are scheduled in the next 30 days in this jurisdiction, so positioning and political headlines are the marginal drivers.
What the desk is arguing
The desk frames the overnight move as a template for 2027: a Democratic sweep of the House, Senate, and key governorships (Texas, with Gina Hinojosa campaigning on a data-centre moratorium, and Michigan's Senate seat trending progressive via Abdul El-Sayed) briefly hit AI-sensitive assets, with Korea and Taiwan equities down 3-4% and US two-year yields dropping 8-9bp before retracing most of that move.
Per the full note , the reversal owes to two things: the Democrats do not take office until January, and President Trump has accepted the results — removing a wild-card downside risk for the dollar. The desk's evidence is the round-trip itself: USD/CHF and USD/JPY recovered roughly half their 1% early-Asia fall, and equity futures have reclaimed the 2-3% overnight losses.
The alternative read — that a new Congress would credibly threaten AI capex and force a sustained dollar-negative repricing — is implicitly rejected by the desk's framing. It treats the episode as a preview rather than a regime change, which is why the price action reversed rather than extended.
Where it sits in our coverage
Our cross-firm consensus for EUR/USD is 1.1500 for Dec-26, with a range of 1.1162 to 1.2000, against current spot of 1.1253. The dispersion is wide: commerzbank at 1.2200, cibc at 1.2200, and nomura at 1.2000 sit at the bullish extreme, while hsbc at 1.1000 and lloyds at 1.1200 anchor the low end.
On USD/CHF the Dec-26 consensus is 0.7800 (range 0.7600-0.8200) versus spot 0.7811, with deutschebank and goldman at 0.7500-0.7600 at the low end and citi at 0.8300 the clear outlier on the weak-franc side. USD/JPY Dec-26 consensus sits at 156.00 (range 140.00-163.00) against spot 155.82, with scotiabank at 140.00 the most yen-bullish and nomura at 165.50 the most yen-bearish. The desk's dollar-negative read aligns with the consensus median on EUR/USD and USD/CHF, but the 1.2000 bullish EUR/USD tail is where the desk's thesis would have to land to be actionable.
How other firms see it
Aligned: commerzbank, cibc, nomura, and rbc all hold EUR/USD Dec-26 targets of 1.1800-1.2200, effectively endorsing the view that dollar downside is the higher-probability path through 2027. rabobank at 1.1800 and bnpparibas at 1.1400 sit closer to consensus, reinforcing the framing.
Contrary: hsbc at 1.1000 and lloyds at 1.1200 are the standing counterweight on EUR/USD, and on USD/CHF citi at 0.8300 and on USD/JPY nomura at 165.50 and mizuho at 163.00 imply a much firmer dollar than the desk's thesis requires. Watch the EUR/USD trajectory as a mirror of the ECB rate path, and USD/JPY as the spillover proxy for any renewed risk-off from political headlines.
What the calendar says
No high-impact events are scheduled in this jurisdiction over the next 30 days, so the desk's preview is not going to be tested by a near-term data print. The next meaningful catalysts are the January 2027 handover of Congress and the subsequent AI-capex commentary from firms exposed to Texas and Michigan policy risk — both beyond the calendar horizon.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The overnight blue-wave price action reversed most of its initial move — US two-year yields dropped 8-9bp then retraced, and USD/CHF and USD/JPY recovered roughly half of their 1% early-Asia declines.
- 02The desk treats this as a preview of 2027, not a regime change, because Democrats do not take office until January and President Trump has accepted the results.
- 03Our EUR/USD Dec-26 consensus sits at 1.1500 (range 1.1162-1.2000) versus spot 1.1253, so the median already leans dollar-negative — the desk's thesis is a consensus view, not a contrarian one.
- 04The bullish EUR/USD tail is **commerzbank** and **cibc** at 1.2200; the bearish tail is **hsbc** at 1.1000 and **lloyds** at 1.1200 — the desk's call only outperforms if the high end is right.
Market implications
Watch EUR/USD at 1.1253 versus the 1.1500 Dec-26 consensus — a break above the March-26 median of 1.1700 would confirm the desk's 2027 preview is being priced forward. USD/CHF at 0.7811 is essentially at the 0.7800 Dec-26 consensus, so the near-term trade is to watch whether the SNB or the AI-capex narrative drives the next 50 pips. USD/JPY at 155.82 sits inside the 149.00-161.71 March range, with the positioning signal being whether the 1% early-Asia move gets rebuilt on the next political headline.
Risks to this view
A credible legislative threat to AI capex — a national data-centre moratorium bill or a federal review of chip export policy — would invalidate the desk's fade-the-headline framing and force a sustained dollar-negative repricing. Conversely, a firmer dollar path, consistent with **citi**'s 0.8300 USD/CHF or **nomura**'s 165.50 USD/JPY, would prove the overnight move was noise rather than preview. The January 2027 handover is the binary event that invalidates or confirms the call.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bearish | 1.1000 |
ING | Bullish | 1.1300 |
MUFG | Neutral | 1.1200 |
Articles FX Daily: Blue wave price action a preview of what’s to come Published 07:45 FX Translate Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download For a change, opinion polls proved correct, and the Democrats delivered a stunning victory in the US midterm elections. Short-dated US rates and the dollar are a little weaker, while equity futures are busy reclaiming some of their 2-3% losses seen overnight on fears that the AI data centre build-out would slow. Price action previews what could come in 2027 Chris Turner , Frantisek Taborsky and Francesco Pesole Democrats have won the Senate and House to take control of Congress USD: A preview for 2027?
The Democrats have delivered on opinion polls and have won both the House and the Senate. And by large margins. They have also won governorship races in key states like Texas.
Investors will be parsing what this all means. For example, Gina Hinojosa won the Texas governor's race on a ticket of wanting an immediate moratorium on data centre buildouts. And it looks like Abdul El-Sayed is going to win the Michigan Senate seat on quite a progressive ticket.
Will the Democrat agenda be pulled to the left on a national basis? Given AI's role in powering the US economy, speculation over whether a new Democrat Congress would slow AI capex plans briefly hit markets. The chip exporter-heavy stock markets of Korea and Taiwan were briefly down 3-4% overnight on news of the blue wave, but have since recouped all those losses.
We've seen the same in US rates and FX markets, where US two-year yields have reclaimed most of their 8-9bp drop and the likes of USD/CHF and USD/JPY have reversed around half of their 1% fall in early Asia. That the initial market moves are being reversed probably owes to the fact that the Democrats do not take office until January. Also, one wild-card risk removed from the dollar's downside has been President Trump accepting these results.
However, overnight price action could provide a preview for markets in 2027. We had felt that a Democrat Congress would be a mild dollar negative – both in terms of what it would mean for the AI story and the prospect of a prolonged US government shutdown potentially from next summer. Before then, however, investors are faced with a strong US economy and a Fed ready to tighten further.
US labour market data has come in on the strong side so far this week. Fresh insights will be seen today in the release of the monthly ADP figure and the employment component in the October ISM services. Also in focus today will be the 1330CET release of the US Treasury's quarterly refunding plans.
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