US Dollar (USD) continues to power forward against all major currencies underpinned by a modest upward adjustment to US rate expectations. A run of Goldilocks-type US data has helped anchor rate expectations in favor of USD, BBH FX analysts report.

SCOTUS tariff ruling adds risk to USD outlook

"Today’s December non-farm payrolls report (NFP) is set to shape the near-term Fed outlook (1:30pm London, 8:30am New York). The January University of Michigan sentiment survey will play second fiddle (3:00pm London, 10:00am New York). Consensus is looking for +70k NFP gains vs. +64k in November and -105k in October due to the government shutdown. Private sector payrolls, a better indication of the underlying momentum in the labor market, is seen at 75k vs. 69k in November. But the significance lies less in the headline job gains, and more in the sector generating them."

"In November, virtually all NFP gains came from the non-cyclical health care and social assistance sector, a pattern that has historically signaled an impending labor market slowdown. We expect a similar outcome in December. ADP private payrolls rose 41k in December with education and health services accounting for 39k of the gain. And, Revelio labs nonfarm payrolls increased 71k in December with education and health services accounting for 31.4k of the gain. If our view of worsening US labor demand pans out, USD will likely unwind recent gains as the rate differentials narrative reassert itself. By contrast, signs of a stabilizing US labor market may help USD push toward the top of the range in place since June 2025 as markets trim Fed funds rate cut bets."

"The US Supreme Court (SCOTUS) decision on President Donald Trump's use of emergency tariff powers could come as early as today. Online betting markets give less than 30% chance the court will uphold the tariffs. A ruling against Trump's emergency tariff powers could see a kneejerk upside reaction in risk assets as it would strip the administration of a key economic weapon. A ruling in favor of Trump's emergency tariff powers would likely be risk-negative and USD positive at the margin because it would re-empower tariffs as a credible, unilateral economic weapon. A muddled ruling, where the court grants limited emergency tariff and require only limited repayment, is the most likely scenario. This would raise policy uncertainty."