US Dollar Index rises to near 99.00 ahead of Nonfarm Payrolls

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The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its winning streak for the fourth successive session. The DXY is trading around 98.90 during the Asian hours on Friday.

US Dollar index gains as traders stay cautious ahead of the US Nonfarm Payrolls report.
US Initial Jobless Claims rose to 208,000, below expectations but above the prior week’s revised 200,000.
US Treasury Secretary Scott Bessent said the Fed should keep cutting rates to support stronger economic growth.

The Greenback gains ground as traders remain cautious ahead of the US Nonfarm Payrolls (NFP) report, which is expected to offer further insight into labor market conditions and the Federal Reserve’s (Fed) policy outlook. December NFP is forecast to show job gains of 60,000, down from 64,000 in November.

On Thursday, the US Department of Labor (DOL) reported that Initial Jobless Claims rose modestly to 208,000 in the week ended January 3, slightly below market expectations of 210,000 but above the previous week’s revised 200,000. Continuing jobless claims increased to 1.914 million from 1.858 million, indicating a gradual rise in the number of people remaining on unemployment benefits.

The US Automatic Data Processing (ADP) reported on Wednesday that Employment Change showed an increase of 41,000 jobs in December, following a revised decline of 29,000 in November. The figure came in slightly below market expectations of 47,000.

JOLTS Job Openings came in at 7.146 million in November. This reading followed the 7.449 million openings recorded in October (revised from 7.67 million) and came in below the market expectations of 7.6 million.

US Treasury Secretary Scott Bessent said in a CNBC interview on Thursday that the Federal Reserve should continue cutting rates, arguing that lower rates are “the only ingredient missing” for even stronger economic growth and that the Fed should not delay.

According to the CME Group's FedWatch tool, Fed funds futures continue to price in about an 86.2% probability that the US central bank will keep rates unchanged at its January 27–28 meeting.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.