US Dollar Rise on Stronger Nonfarm Payrolls 

Last Friday, the increase in the jobless rate showed weakness in household employment data. The smaller and more volatile household survey that determines the unemployment rate showed a decrease of 355,000 jobs. In contrast, nonfarm payrolls increased by 227,000 in November, following an upwardly revised increase of 36,000 for October from the previously reported 12,000. Hence, the U.S. Dollar Index gained 0.23% and settled at 105.97. 

(U.S. Dollar Index Daily Price Chart, Source: Trading View) 

On average, the job gains monthly have slowly fallen below the level of 150,000 established during the past four reports, which many economists see as an infeasible growth rate to catch up with the growing population. 

(U.S. Nonfarm Payrolls Data, Source: LSEG) 

Post-payroll data release indicated that U.S. rate futures now show an 85% chance of a Fed cutting rates by 25 bps at its policy meeting later this month, compared to around 70% prior to the report, as per LSEG calculations. The likelihood of a pause, however, slid to 15% from 30%. 

The Fed is expected to continue a 25-basis-point rate cut to transition monetary policy from tight to neutral positions. However, this is likely to give indication of a precautionary cut in the pace of rate cuts, with the prospect of freezing decision at the January FOMC meeting becoming even more certain. 

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