The US Dollar is trading near yesterday’s high, with the dollar index (DXY) just 0.3% below its 200-day moving average. <\/p>\n
The December ADP employment report and November JOLTS report are expected to be important for policy, with consensus predicting ADP private payrolls to be at +50k, up from -32k in November. <\/p>\n
Recent months have seen an average loss of 13,000 jobs, suggesting potential challenges in labour demand. <\/p>\n
Further declines in JOLTS hiring and quit rates could signal worsening labour conditions, supporting predictions of 50 basis points cuts in Fed funds futures for 2026, which may affect the USD. <\/p>\n
The US December ISM services index is anticipated to show strong service sector activity, with a projected headline index of 52.2, slightly down from 52.6 in November. <\/p>\n
A decrease in the prices paid sub-index could strengthen the argument for additional rate cuts by the Fed. <\/p>\n
This information has been compiled and presented by the FXStreet Insights Team, which includes observations from both commercial analysts and external experts.<\/p>\n
As we look back on the end of 2025, the market was correctly focused on weakening labor demand to justify future rate cuts. The December 2025 jobs data confirmed this view, with Non-Farm Payrolls coming in at just 90,000, well below consensus. This followed the trend seen in the JOLTS data for November 2025, which showed job openings falling to an 18-month low of 8.5 million.<\/p>\n
These figures gave the Federal Reserve the evidence it needed to pivot more dovish, cementing expectations for rate cuts in 2026. The December ISM services index also supported this, as the prices paid component dropped to its lowest level since 2023, signaling that inflation is easing. Because of this, we’ve seen the market move from pricing in 50 basis points of cuts to now expecting at least 75 basis points of easing this year.<\/p>\n
This shift has kept pressure on the US Dollar, with the DXY failing to reclaim its 200-day moving average after breaking below it in late December. For traders, this environment makes short-dollar positions attractive against currencies with more hawkish central banks. We should consider using options to express this view, such as buying puts on the dollar index or selling call spreads to capitalize on a capped upside.<\/p>\n
Given the high probability of rate cuts starting as soon as the March meeting, interest rate derivatives offer a direct way to position for this. We can look at Eurodollar or SOFR futures contracts to lock in lower rates expected for the second half of 2026. The key will be timing the entry, as much of this easing is already priced in by the market.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US labor data and service sector trends may support Fed rate cuts, influencing US Dollar performance.<\/p>\n","protected":false},"author":62,"featured_media":16966,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-38496","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38496","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=38496"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38496\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16966"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=38496"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=38496"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=38496"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}