The big news in the forex market these days is the plight of the dollar. After a vigorous recovery in the first half of 2010 which was marked by the weakness of the Euro, the greenback has falled to an eight month low against a basket of other currencies and is exploring the edges of a 15 year low agains the Yen (click here for an analysis of the USD/JPY).
This comes as traders are worried that the Federal Reserve will take further actions to ignite a renewed financial recover in America. This basically means keeping interest levels low and printing more money. Both of these steps are bad for the Dollar.
However, there’s another dark cloud looming in the dollar’s horizon: the midterm elections in the United States which will be held in 4 weeks time.
No one knows exactly what is going to happen in these elections nor what the political landscape will be the day after. However, one thing is clear and that is that president Obama is going to have a tougher time of governing than he has today when his party, the Democrats hold a clear majority in both houses of Congress.
Should the Republican gain control of either or both houses, it can mean a practical stalemate in the domestic political arena in the US with no new policy being carried out, or if it does get carried out, it will be a slow and agonizing process and not something that can really solve America’s financial woes.
So, the US Dollar may be in a bit of a hopeless ditch until after the November elections are done and the political dust has settled a bit. Until then, there is a lot more uncertainty concerning the dollar and where it is indeed going.
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