In December, average hourly earnings in the United States rose by 3.8% year-over-year, outperforming the forecast of 3.6%. The US Nonfarm Payrolls data release had a mixed effect on the markets, influencing various currency and commodity dynamics.
The US Dollar’s firm performance affected several currency pairs, with USD/CAD gaining strength influenced by labour data and oil pressures on the Canadian Dollar. Similarly, the USD/JPY neared a one-year high due to reduced expectations of immediate Federal Reserve rate cuts.
Steady Commodities
In commodity markets, gold remained steady near its yearly high of $4,500 despite the strengthened Greenback. Meanwhile, cryptocurrencies like Bitcoin and Ethereum faced sell pressures due to waning institutional interest and ETF outflows, holding at $90,000 and above $3,000, respectively.
The upcoming week’s focus may shift to US consumer price index (CPI) figures alongside geopolitical influences. XRP experienced downward pressure amidst a risk-averse market and weakening retail demands. Several broker guides for 2026 offer insights into trading strategies, covering best brokers across different categories and regions.
The stronger-than-expected wage growth of 3.8% for December 2025 has significantly changed the landscape for the coming weeks. We must now assume that the Federal Reserve will be more hesitant to cut interest rates in January. Looking back, similar strong labor market reports throughout 2024 and 2025 consistently forced the Fed to maintain a hawkish stance.
This means the US Dollar is likely to remain strong against other major currencies. The market is rapidly repricing rate expectations; just last week, Fed Funds futures implied a 65% chance of a January cut, which has now collapsed to under 25%. We should therefore favor long dollar positions against currencies like the Euro and the British Pound.
Impact on Interest Rate Traders
For interest rate traders, this shifts the focus toward a “higher for longer” scenario. The 2-year Treasury yield, which rose sharply on the news, is the key indicator to watch, as it closely reflects near-term Fed policy. We should consider options strategies that protect against yields remaining elevated or even rising further.
In the equity markets, this development is a headwind, particularly for growth and tech stocks sensitive to interest rates. The CBOE Volatility Index (VIX) has been hovering around a low level of 14, suggesting that market insurance is relatively cheap. We see this as an opportunity to buy put options on indices like the S&P 500 to hedge against a potential downturn.
The strength in gold, despite a rising dollar, points to a separate risk factor driving markets, possibly related to geopolitical tensions. This unusual divergence suggests we cannot simply be short all assets. Holding positions in gold, perhaps through call options, could provide a valuable hedge against non-economic shocks.
Everything now hinges on next Tuesday’s Consumer Price Index (CPI) report. If inflation also comes in hotter than expected, it will confirm the wage data and likely accelerate these market trends. We must remain nimble and be prepared for heightened volatility surrounding that release.
