Credit Agricole CIB Research on USD outlook into next week's US midterm elections.

"Ahead of the US midterms on 3 November, betting odds markets predict a victory for the Democratic Party that could see it potentially gaining control over the US Congress. In a recent focus piece, we analysed the USD performance after US elections since 1976 and concluded that the FX market impact depended on whether Democrats controlled the House only, or the Senate as well. In the case of the former, the USD rebounded strongly while it sold off in the case of the latter," CACIB notes.

"Assessing the FX impact from the midterms is further complicated by two seemingly conflicting USD drivers that could play out sequentially in the coming months. In the immediate aftermath of the vote, investors will focus on any indication that the Trump administration would re-escalate the conflict in Iran and thus boost the appeal of the high-yielding, safe-haven King USD across the board. The initial USD positive impact need not last, however, if we end up with another TACO (Trump Always Chickens Out) situation," CACIB adds.