No 1990s Déjà-vu

QCAM expects a softer US dollar through year end as the midterm election result moderates US policy, while the current AI boom lacks the broad economic support that drove the 1990s dollar rally.

• The Democrats won majorities in both chambers of Congress and several state governorships, while President Trump accepted the result and said he would work with them.
• QCAM expects less confrontational foreign policy, fewer new trade tensions, tighter regulatory oversight of AI and limited scope for tax cuts or large fiscal expansion.
• The report sees lower escalation risk in the conflict with Iran and expects falling oil prices, while the US debt ceiling is expected to be reached by mid-2027.
• QCAM shifted all discretionary macro positions to short USD because net speculative dollar positions are massively overbought, although it expects relative economic performance to regain importance over time.
• The US Dollar Index was 14% above QCAM's purchasing-power-parity estimate on November 4, 2026, while the yen was the most undervalued major currency and the euro, Swiss franc and Australian dollar were closest to fair value.
• QCAM expects one further 25-basis-point rate increase from both the Federal Reserve and the ECB, plus 100 basis points of cumulative BoJ hikes through the end of 2027.

Takeaway: The report supports a near-term bearish USD position, with the caveat that a more persistent dollar decline requires weaker relative US economic performance because the AI investment cycle remains a source of dollar support.