The US Dollar stayed firm late in the week after January US labour data. Thursday’s US calendar includes weekly Initial Jobless Claims and January Existing Home Sales.
US Nonfarm Payrolls rose by 130,000 in January, after 48,000 in December (revised from 50,000), beating the 70,000 forecast. The jobless rate eased to 4.3% from 4.4%, and participation rose to 62.5% from 62.4%.
Dollar Reaction And Market Snapshot
The USD Index climbed to about 97.30 after the data, then traded around 97 early Thursday. US stock index futures were up 0.2% to 0.3%.
UK GDP rose 0.1% in the three months to December 2025, matching Q3’s 0.1%. Year-on-year growth was 1.0% in Q4 2025 versus 1.2% expected and 1.2% in Q3 (revised from 1.3%), while industrial and manufacturing output fell 0.9% and 0.5% month-on-month in December; GBP/USD was near 1.3630.
EUR/USD held near 1.1870, while USD/JPY traded below 153.00 at a two-week low. AUD/USD hit about 0.7150 after a 0.7% rise, then stayed above 0.7100; gold held above $5,000.
The strong January jobs report, with Nonfarm Payrolls beating expectations at 130,000, reinforces our view that the Federal Reserve will maintain its restrictive monetary policy. This data confirms the US economy’s resilience and supports the US Dollar’s strength. We should therefore consider positioning for continued dollar upside through options or futures markets.
Inflation And Policy Implications
Adding to this, the latest Consumer Price Index (CPI) reading for January 2026 showed headline inflation at 3.1%, stubbornly above the Fed’s 2% target. When we look back at the Fed’s commentary from late 2025, they consistently prioritized fighting inflation. This new jobs data gives them little reason to consider cutting interest rates anytime soon.
The divergence between the US and UK economies is becoming more apparent. While the US labor market is robust, the UK’s Q4 2025 GDP grew by a mere 0.1%, with December industrial production falling. This fundamental weakness suggests that GBP/USD is vulnerable, and we should look for opportunities to initiate bearish positions, such as buying put options on the pound.
Interestingly, despite broad dollar strength, USD/JPY is trading at a two-week low below 153.00. This is likely driven by growing market speculation that the Bank of Japan may be preparing to exit its negative interest rate policy, a move that would strengthen the yen. This conflicting dynamic makes the pair risky, so we should remain cautious until we see a clearer signal from the BoJ.
Gold’s stability above $5,000 is notable given the hawkish Fed environment. Normally, a strong dollar and high interest rates would pressure gold prices lower, as they did for much of 2025. Its current resilience suggests traders are using it as a hedge against persistent inflation or geopolitical risks, making aggressive short positions on the metal ill-advised for now.
Meanwhile, the Australian Dollar is showing independent strength following hawkish comments from the RBA. With the AUD/USD pair holding above 0.7100, we are seeing a battle between two strong currencies. This could lead to range-bound trading, making strategies that profit from low volatility, such as selling strangles, worth considering.
