Dollar is under pressure, eyes US data for a recovery 

US data calendar in the spotlight today

With the US dollar underperforming across the board during yesterday's session and US stock indices failing to make new all-time highs, the focus turns to the US labour market report. The importance of today’s data cannot be underestimated, considering the public debate between the doves and the hawks regarding the December 18 Fed meeting.

It has been a mixed week in terms of US data prints. The decent ISM manufacturing survey and the strong ADP employment report were followed by higher weekly claims and an awful ISM services figure, confusing investors and further raising the importance of today’s calendar.

Nonfarm payroll report expected to show a decent increase

The November nonfarm payroll figure is forecast to increase by 200k, driven by a strong rise in private payrolls. Additionally, the unemployment rate is expected to jump to 4.2%, 0.1% higher than the October figure, with the average earnings growth easing to 3.9%. Notably, the market will be also interested in any revisions to the 12k October nonfarm payroll print, which was the lowest number since the outbreak of the COVID pandemic.

A positive set of data could go a long way in alleviating any concerns about an imminent slowdown of the US economy, especially as the Atlanta Fed GDPNow model is currently pointing to 3.3% Q4 GDP growth. In this case, and assuming that next week’s inflation report does not produce a downside surprise, the Fed might find it extremely difficult to ease in two weeks’ time. The dollar stands to benefit from this scenario, recovering part of its recent losses against the euro.

On the flip side, weak data prints today, especially another nonfarm payroll figure below 75k and a lack of an upwards revision in the October number, could tip the balance in favour of a Fed rate cut on December 18. Fed members are already on edge regarding the impact of the announced tariffs, so another 25bps rate reduction could make sense at this stage. The dollar stands to somewhat suffer in this case, particularly against the yen and the pound.

Do stocks want a strong or a weak report?

The key question regarding today’s price action is how stock indices will react. A weak labour market report could unlock the December Fed rate cut and potentially open the door to bolder tax cuts from Trump, while a strong set of figures could push the next Fed rate cut further out. At the same time, though, it could confirm that the US economy remains strong, as shown by post-Thanksgiving spending.

Regardless of the data prints, Fed speakers are expected to flood the newswires with their final comments ahead of the usual blackout period. Goolsbee and Hammack are scheduled to speak today, but the focus will be firmly on Bowman and Daly, who are considered more hawkish than Chair Powell.

Asian currencies at key levels against the dollar

Today’s US data calendar kicks off an extremely busy period for the markets, with next week’s calendar including four central banks meetings. Both the RBA and the BoC will meet with their respective currencies at key levels against the dollar. The aussie is hovering at a three-month low, while the dollar/loonie pair could record a new 4.5-year high if the data favours the greenback.

Interestingly, the yen is putting up a proper fight as dollar/yen continues to trade around the 150.00 level. Today’s labor cash earnings and household spending data were solid, maintaining the dented chances for a 25bps rate hike by the BoJ on December 19.

Gold stable, bitcoin eases from new record-high level

Finally, while gold continues to trade within the $2,600-2,670 range, bitcoin had a rollercoaster session yesterday. After trading just below the $104k level, a new all-time high, heavy profit-taking ensued, pushing it back to its current levels. Despite this volatility, the crypto market remains in a buoyant mood, boosted by the new SEC head nomination.