• EUR/USD wobbles near 1.0900 ahead of the US presidential election, which will influence market sentiment.
• Investors expect a neck-to-neck competition between Kamala Harris and Donald Trump.
• The ECB is expected to cut interest rates by 25 bps in the December meeting.

EUR/USD consolidates around 1.0890 in Tuesday’s European session. The major currency pair remains shy of the key resistance of 1.0900 on the United States (US) presidential election day. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades steadily near 103.80 at the time of writing. 

The Greenback exhibited a strong buying trend in October as traders were pricing in former US President Donald Trump’s victory. However, it struggles to extend its upside further as traders expect tough competition between Trump and current Vice President Kamala Harris now. The likelihood of Trump’s victory has witnessed a pullback after the Des Moines Register/Mediacom Poll showed Harris gaining a slight lead of three points in Iowa state, where the Republican party gained a clear majority in 2016 and 2020.

“A Red Wave (favoring Republicans) would kick-start a sizeable USD rally. It would rekindle memories of US Exceptionalism, anchored by tariffs, tax cuts, deregulation, and negative impacts on the outlook for EZ and China," according to analysts at TD Securities.

While the US presidential election will be the key event for the US Dollar this week, investors will also pay close attention to the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Thursday. The Fed is expected to reduce interest rates by 25 basis points (bps) to 4.50%-4.75%, according to the CME FedWatch tool. Investors will focus on Fed Chair Jerome Powell's speech for fresh cues over likely monetary policy action in December.