Dollar Surges as Resilient Unemployment Data Dashes January Rate Cut Hopes

The US Dollar Index extended its winning streak to a fourth consecutive day, hitting a one-month high, after the DecemberNon-Farm Payrolls (NFP) report painted a picture of a labor market that is cooling yet sufficiently tight to deter immediate monetary easing. While headline job creation missed estimates, a surprise drop in the unemployment rate to 4.4% has led traders to completely price out a Federal Reserve interest rate cut for January.

Payrolls Miss, But Labor Tightness Persists

According to the Bureau of Labor Statistics, the US economy added 50,000 jobs in December, falling short of the consensus expectation of 65,000. This caps a sluggish year for job growth; total payroll expansion for 2025 stood at just 584,000, the weakest annual performance since the pandemic recovery began.

However, the headline miss was overshadowed by the drop in the unemployment rate to 4.4%, coupled with a 3.8% year-over-year rise in wages. These metrics suggest that while hiring velocity has slowed, structural labor demand remains intact, negating the urgency for the Fed to act in its upcoming meeting.

Markets Reprice Fed Path

Financial markets reacted swiftly to the data. The probability of a January rate cut, previously a contentious debate among traders, effectively fell to zero in the swaps market.

Trump Administration “Leak” Controversy

In an unusual development, markets navigated volatility ahead of the official release after President Trump posted figures on social media 12 hours prior, which aligned perfectly with the official data. This breach of protocol underscores the unconventional communication style of the current administration, though market fallout was contained as the official print confirmed the “leaked” numbers.