Dollar: Blue Wave Reshapes Growth and Risk – Commerzbank

Commerzbank analyst Volkmar Baur noted that the "blue wave" triggered by the Democratic Party's strong performance in the U.S. election may be reshaping the dollar's growth outlook and risk pricing. Lead: He believes this shift in the political landscape has triggered an initial weakening of the dollar against the euro and may continue to pressure U.S. Treasury yields and equities, particularly the tech sector.

**Political Risk Premium Fading**

Baur analyzed that as election results settle, some political uncertainty previously priced into the market is receding. Specifically, the AI-related investment boom may slow, expectations of Trump-era pressure on the Federal Reserve have significantly eased, and the possibility of a shift toward centrist political stances—combined, these factors will gradually reduce the political risk premium previously enjoyed by dollar assets. This structural change is seen as the key medium-term logic behind the recent pressure on the dollar-euro exchange rate.

**Transmission to Tech Stocks and Rates**

The bank also warned that the impact of these political shifts on specific assets could be more pronounced. If AI investment pace slows as expected, tech stocks that led gains earlier may face additional valuation pressure. Meanwhile, easing concerns over Fed independence opens room for lower U.S. Treasury yields, further undermining the dollar's interest rate advantage. At the time of writing, EUR/USD traded near 1.1229, with markets digesting this dovish policy expectation.

**Short-Term Rebound and Medium-Term Bottom**

Drawing on past technical assessments, Commerzbank had previously flagged stabilization signals in EUR/USD. The bank's analysts noted that after a hawkish Fed meeting, EUR/USD stabilized below 1.15, suggesting a possible bottom had formed. Earlier technical analysis also mentioned positive divergence in the Relative Strength Index, indicating room for a restorative rebound in the short term. Currently, the convergence of political fundamentals and technical signals is providing support for the euro.