Nonfarm Payrolls Below Expectations, Dollar Unwavering
The Bloomberg Dollar Index strengthened slightly following the release of US employment data, despite mixed signals. December's job growth was lower than expected, but the decline in the unemployment rate kept the dollar supported, as markets believed the economy hadn't truly weakened.
The Bloomberg Dollar Spot Index rose around 0.1% and briefly reached a daily high shortly after the data was released, before calming down. The data showed that nonfarm payrolls increased by only 50,000 (below the 70,000 forecast), while the unemployment rate fell to 4.4% (4.5% forecast).
In the bond market, the 2-year Treasury yield rose around 2 basis points to 3.51%, indicating that interest rate expectations remain tight despite the NFP miss. Traders continue to price in two Fed rate cuts this year, and the chances of a change in January are considered slim. Risk sentiment has also improved, as evidenced by strengthening US stock futures.
The focus next shifts to the US Supreme Court, which is scheduled to issue its first ruling in 2026. Among the most anticipated is a ruling on the legality of the Trump administration's use of the IEEPA to impose broad tariffs—an issue that could alter the course of trade policy and trigger market volatility.
In the euro market, EUR/USD fell for a fourth consecutive day and briefly weakened by around 0.3% to 1.1627, its lowest in a month. Several hedge funds were said to be aggressively buying short-term EUR/USD put options ahead of the data release, indicating a market-wide defensive stance on the euro.
Meanwhile, the Canadian dollar (loonie) pared losses after better-than-expected Canadian jobs data. USD/CAD fell slightly to around 1.3877 after the report showed Canadian jobs rose by 8.2,000 (-2.5,000 expected), although the unemployment rate rose to 6.8%.
In Asia, USD/JPY rose around 0.6% to 157.80, approaching its November peak. In the UK, GBP/USD weakened to around 1.3400, its lowest since December 22, while UK government bonds are likely to post their biggest weekly gain since October due to a reduced supply of long-dated bonds and growing expectations of a Bank of England interest rate cut.
Source: Newsmaker.id
