Dollar is charging higher in early US session, buoyed by a strong set of employment data. Non-farm payrolls surged well above expectations in December, while the unemployment rate unexpectedly ticked lower. This set of data solidified the market’s belief that Fed will pause rate cuts at its upcoming meeting later this moth, with the probability now exceeding 97%. Adding to the hawkish sentiment, odds for a rate hold in March have also risen sharply, now exceeding 70%, signaling that Fed may extend its pause in easing longer than previously anticipated.
The robust jobs data weighed heavily on equity and bond markets. DOW futures plunged more than -300 points in early trading, while NASDAQ futures shed over -1%. Treasury yields have also surged, with the 10-year yield setting its sights on the critical 4.8% level. Both these movements are unequivocally supportive for Dollar.
While Dollar’s momentum appears solid, market participants might turn cautious ahead of the weekend. With President-elect Donald Trump’s inauguration just days away, traders are wary of surprises or new trade policy developments that could inject volatility into the markets. Profit-taking may emerge before the weekly close.
Overall, despite Dollar’s strong showing, Loonie remains the week’s best performer, with Canada’s robust labor market report is flooring its selloff. Meanwhile, Euro continues to hold its ground as the third-strongest currency, benefitting from sterling’s continued weakness.
At the bottom of the leaderboard, the Pound is staying as the weakest amid concerns over the UK government’s fiscal challenges. At the same time, Aussie and Kiwi are the next worst. With equity markets under strain, further declines in risk-sensitive assets could deepen the antipodeans’ losses. Swiss Franc and Japanese Yen are holding the middle positions.
US NFP grows 256k, unemployment rate ticks down to 4.1%
US labor market showcased its resilience in December, with non-farm payrolls surging by 256k, significantly outpacing expectations of 150k. This impressive figure also surpassed the average monthly gain of 186k for 2024.
Unemployment rate edged down to 4.1%, beating forecasts of remaining steady at 4.2%. This marks the seventh consecutive month where the unemployment rate has hovered within a tight range of 4.1% to 4.2%, reflecting a steady labor market. Meanwhile, the labor force participation rate held steady at 62.5%, a level consistent with its range since late 2023.
Wage growth showed a measured pace, with average hourly earnings rising by 0.3% mom, in line with market expectations. On a yearly basis, wage growth softened slightly to 3.9% from 4.0% yoy previously.
Canada’s employment rises 91k in Dec, unemployment rate down to 6.7%
Canada’s labor market closed 2024 on a strong note, with employment soaring by 91k in December, far exceeding expectations of 24.9k. Full-time positions accounted for a significant portion of the gains, with 56k new roles added.
Unemployment rate fell to 6.7%, defying expectations of an increase to 6.9%, and marked an improvement from the previous month’s 6.8%. Employment rate also increased by 0.2 percentage points to 60.8%, marking the first uptick since January 2023.
Total hours worked rose 0.5% mom and were 2.1% higher than a year earlier. Meanwhile, average hourly wages grew 3.8% yoy, a deceleration from November’s 4.1% yoy.
Japan’s household spending falls for fourth month, minister flags critical economic transition
Japan’s household spending declined for the fourth consecutive month in November, falling -0.4% yoy. While this was an improvement from October’s -1.3% drop and surpassed expectations of -0.8%, it still reflects ongoing consumer caution.
The decline was driven by significant cuts in expenditures on home appliances and food, highlighting weak domestic demand.
Spending on furniture and electric appliances plummeted by -13.8%, marking the third straight month of decline, while clothing and footwear saw a similar drop -of 13.7%, down for the second consecutive month. Food purchases also contracted slightly, falling by-0.6%.
Separately, Economy Minister Ryosei Akazawa acknowledged the challenges, stating that Japan’s economy is at a “critical stage” in shifting public sentiment away from deflation and toward sustainable growth driven by higher wages and investment.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 0.9101; (P) 0.9117; (R1) 0.9137; More…
USD/CHF’s rally resumed by breaking through 0.9136 and intraday bias back on the upside. Current rise from 0.8374 will now target 0.9223 key resistance next. Decisive break there will carry larger bullish implications. For now, near term outlook will stay bullish as long as 0.9007 support holds, in case of retreat.
In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with rise from 0.8374 as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes. However, decisive break of 0.9223 will be an important sign of bullish trend reversal.
