Dollar little changed after blowout U.S. nonfarm payrolls report
The U.S. dollar was little changed to slightly lower on Wednesday, after traders pared back their Federal Reserve rate cut expectations following a blowout January jobs report.
At 15:33 ET (20:33 ET), the dollar index, which tracks the greenback against a basket of its global currency peers, had inched up by 0.1% to 96.87.
Blowout jobs report spurs recalibration of Fed rate cuts
Nonfarm payrolls in January increased by 130k, according to government data, much higher than the anticipated figure of 66k. The unemployment rate ticked down to 4.3% from 4.4% in December 2025.
The strong data spurred traders to recalibrate their rate cut expectations. With the labor market seemingly solid and inflation on the right track, investors pared back their bets for rate cuts and snapped up bonds, sending Treasury yields higher.
"The greenback is weakening despite slipping Treasuries, as currency watchers consider that President Trump is likely to push for cheaper borrowing costs irrespective of the increasingly robust employment picture," José Torres, senior economist at Interactive Brokers, said.
At its latest monetary policy meeting last month, the Fed described the labor market as “stabilizing” after a recent bout of sluggishness. This argument, combined with signs of steady — albeit elevated — inflation, persuaded the Fed to keep interest rates unchanged at a range of 3.5% to 3.75%.
But White House economic adviser Kevin Hassett warned earlier this week that AI advances could dent U.S. job gains in the coming months, even as productivity is boosted.
The next catalyst for assessing the monetary policy outlook for the current year will come in Friday’s consumer price index data.
"The latest dollar selloff was not initiated primarily by U.S. data weakness, but the calendar this week has all but endorsed the sourer mood on the greenback," analysts at ING, including Francesco Pesole, said in a note.
Yen continues surge, Australian dollar hits 3-year high
The Japanese yen has weighed on the dollar recently, having extended a run of outperformance since Prime Minister Sanae Takaichi’s sweeping election win over the weekend. The USD/JPY was last down 0.8% to 153.08, bringing its gains against to dollar since last Friday to around 2.6%.
The euro, meanwhile, weakened against the dollar, with EUR/USD falling 0.2% to 1.1873.
The Australian dollar was a standout performer in the Asian region, surging to a three-year high following more hawkish signals from Reserve Bank of Australia officials.
RBA Deputy Governor Andrew Hauser said during an address on Wednesday that inflation still remained too high, and that interest rates were not restrictive enough to offset this trend. His comments came just a week after the RBA hiked rates by 25 basis points - its first increase in two years, as the central bank grapples with a late-2025 resurgence in inflation.
Hauser’s statements also seemed to suggest that the RBA could lift rates again this year, a notion that supported the Aussie. Investors are now waiting for first-quarter inflation data to help gauge whether more rate hikes are in the cards.
Source: Investing.com
