Americans vote on Tuesday, November 3. All 435 seats in the House of Representatives and 35 Senate seats are on the ballot. For currency traders, the question isn’t who should win. It’s how markets might react, and how to avoid getting caught on the wrong side of a surprise.
I’ve been caught before. Years ago, going into a US election, I expected one outcome. The result was a surprise, and the volatility destroyed me. I was up nicely on my position before the result, didn’t close the trade, regretted it, tried to make it back, and lost it all. That lesson shapes how I trade every election week now.
Why elections move currencies
Elections change expectations about government spending, taxes, trade policy and regulation. Those expectations feed into interest rates, growth forecasts and the US dollar.
Midterms usually matter less than presidential elections, because the president stays the same. What changes is who controls Congress, which affects how easily the administration can pass budgets, spending, and tax changes. A divided Congress tends to mean gridlock; a unified one can mean bigger policy changes.
Going into this one, prediction markets and forecasters have leaned toward Democrats taking the House, with the Senate seen as closer and more uncertain. Forecasts and markets can be wrong, and that’s exactly the point: the biggest moves come when the result differs from what the market has already priced in.
Surprise is what moves markets
If the expected outcome happens, it’s often already in prices, and the reaction can be muted. If something unexpected happens, the move can be fast and violent, often overnight while results come in and liquidity is thin.
Election night has some features that make it especially dangerous:
- Results arrive over hours, mostly during the evening and overnight in Toronto, when liquidity is lower.
- Spreads widen, and prices can jump past stop losses.
- The first reaction can reverse as more results come in, or as the market rethinks what the result means.
- Close races can take days to call, keeping uncertainty high.
My approach: step away from the US dollar
During a US election week, I avoid trading US dollar pairs. Instead, I focus on crosses: pairs that don’t include the US dollar, like:
- EUR/GBP
- AUD/CAD
- CAD/CHF
- EUR/CAD
- CAD/JPY
- GBP/JPY
These can still move on election news, because risk sentiment affects everything. But they’re one step removed from the direct impact on the dollar, and their moves tend to follow their own economies more closely.
One caution: some of those crosses, especially the yen pairs like CAD/JPY and GBP/JPY, are sensitive to risk sentiment. If an election shock sends markets into risk-off mode, the yen often strengthens, and those pairs can drop sharply too. “Not USD” doesn’t mean “not affected.” Our guide to currency correlation explains how to see what you’re really exposed to.
If you do trade USD pairs this week
Some traders deliberately want exposure to election moves. If that’s you:
- Decide before election night whether you’ll hold anything through the results. Don’t decide at 11 p.m. while results flash on the screen.
- Reduce size, a lot. Expect wider stops and bigger gaps.
- Take profits that are on the table. That’s my lesson from experience: if a position is up nicely before an uncertain event, banking at least part of it beats watching it disappear.
- Don’t revenge trade the next morning. If the result goes against you, the urge to make it back fast is exactly what turns a bad night into a wiped account.
- Understand your margin. Gaps can push your margin level down faster than a stop can fill. See our guide to margin calls and stop-outs.
What to watch after the results
Once the outcome is clear, attention turns to what it means:
- Fiscal policy: spending and tax plans, and what they mean for US borrowing and bond yields.
- Trade policy: tariffs, including the ones affecting Canada, which matter for the loonie.
- The Fed: whether the result changes expectations for interest rates.
- Risk sentiment: whether stocks rally or sell off, which flows through to risk currencies like the Canadian dollar.
The week after an election often tells you more than election night itself. Let the dust settle and trade the new picture once it’s clearer.
Canada’s angle
For Canadian traders, the US-Canada trade relationship makes the result especially relevant. Tariff policy has already moved the loonie this year. Watch how the outcome is expected to affect trade talks, and remember that USD/CAD reacts to both sides. As with central bank weeks, which we cover in our Bank of Canada guide, standing aside is a perfectly good plan.
The bottom line
The US midterms are on November 3. Elections move currencies through changing expectations, and surprises do the most damage, often overnight with thin liquidity and wide spreads. My approach is to step away from US dollar pairs and focus on crosses like EUR/GBP, AUD/CAD or EUR/CAD, while remembering that risk sentiment still reaches them. If you do hold positions through the results, size down, protect profits, and don’t try to make it all back the next morning.
Disclosure: The author, Mike Harding, founded Academy of Financial Markets in Toronto and teaches its mentorship program. This article does not take any political position. Election expectations are as of early October 2026 and may change. This article is educational and is not financial advice. Trading carries a high level of risk.