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[MARKET ANALYSIS] DXY gains edges higher ahead of NFP, while JPY lags

The DXY is making gains ahead of the crucial nonfarm payroll (NFP) report, reflecting preemptive positioning in the market as traders anticipate stable labor market data.

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[MARKET ANALYSIS] DXY gains edges higher ahead of NFP, while JPY lags

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  • DXY has been edging higher since APAC trade as traders position for the US jobs report (Full Newsquawk Preview available), with the US data yesterday also pointing to no imminent meltdown in the labour market (with the 4-week initial claims average hitting its lowest level since April 2024, while Revelio estimated growth of 71k jobs).
  • Headline nonfarm payrolls are expected to be relatively in line with the prior. Consensus looks for 60k nonfarm payrolls to be added to the economy vs the 64k in November. Analysts at ING “doubt the greenback has much further to rally unless numbers are materially stronger than consensus.” Aside from NFP, the Supreme Court of the United States (SCOTUS) has scheduled an opinion day for Friday, with the justices taking the bench at 10:00 EST/15:00 GMT. Note the Court does not say in advance which cases will be decided, so a tariff ruling is possible but not guaranteed (Full Newsquawk preview on the feed). Kalshi and Polymarket both point to a 26% chance that the SCOTUS rules in favour of the Trump tariffs. Nonetheless, it is the view that if SCOTUS declares the tariffs unlawful, then the Trump admin will look to reinstate them via other means. DXY resides towards the top end of a 98.90-99.07 range at the time of writing, with the 10th Dec high at 99.256.
  • JPY is the laggard amid a double-whammy from the firmer USD alongside net-dovish BoJ sources via Bloomberg, which suggests BoJ officials are set to keep rates on hold this month, and that officials have no pre-conceptions on the pace of hiking rates. USD/JPY looks set to test a couple of resistance levels (19th Dec high at 157.76 and the 20th Nov peak at 157.89) ahead of 158.00.
  • Elsewhere, G10s are broadly lower with the antipodeans among the worst performers despite firmer copper prices and positive risk sentiment, but after Chinese CPI Y/Y missed forecasts. European FX are mildly pressured by the USD with region-specific catalysts on the lighter end. EUR/USD saw no reaction to above-forecast November Retail Sales or commentary from ECB’s newest member Radev, who joined as Bulgaria officially adopted the EUR.
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Notably, the JPY is lagging, weighed down by dovish signals from the Bank of Japan regarding interest rates. A stronger-than-expected NFP could further bolster the USD, but analysts caution that much of the upside is already priced in unless data significantly exceeds forecasts.

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