NFP Quick Analysis: America loses jobs, Fed may come to the markets' rescue, downing the dollar

  • The US has lost 140,000 jobs in December, far worse than expected. 
  • Concerns about deeper scarring of the economy may prompt action by the Fed.
  • A reversal of yield gains may send the dollar down. 

Winter has come – and it is taking its economic toll. The US has shed 140,000 in December, the first fall since the spring, and worse than expected. The virus has been raging in the last month of 2020 and government support was still in the works. Revisions added 135,000 to the previous two months, but the most recent figure is more worrying.

The Unemployment Rate remained at 6.7% against expectations of an increase to 6.8%, yet it comes on top of a low participation rate. 

The employment to population ratio is at 57.4%, unchanged but around three points below 2019 levels, a broad view of labor market damage that shows how the jobless rate is skewed. 

The US was expected to report an increase of around 71,000 positions in December, a modest pace in comparison to both the pre-pandemic era and especially to the substantial recovery since the spring. ADP's private-sector labor figures pointed to a loss of 123,000 jobs. Finally, ADP's data was correct. 

Fed to the rescue? 

The US dollar has been rising in tandem with bond yields. Investors sold off Treasuries in anticipation of additional issuance due to the massive stimulus that Democrats are set to pass. President-elect Joe Biden will likely take advantage of his new majority in the Senate to pass through multi-trillion relief packages. 

However, the Federal Reserve is ready to buy more bonds – it already opened the door back in December and the meeting minutes reiterated this stance. Will it happen now? Another boost from the Fed would push yields lower and crush the dollar's recovery. 

Jerome Powell, Chairman of the Federal Reserve, speaks next week and may trigger market volatility. 

More Five factors moving the US dollar in 2021 and not necessarily to the downside


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD hits fresh one-month low amid souring market mood

EUR/USD has been extending its falls and dips below 1.21 as US retail sales badly disappointed and the worsening mood is supporting the safe-haven dollar. Markets digest Biden's stimulus plan. US Consumer Sentiment declined to 59.2 points. 


GBP/USD retreats toward 1.36 amid fresh dollar strength

GBP/US has pared its gains and falls toward 1.36 as the dollar gains ground. The UK economy shrank by 2.6% in November, better than estimated. The UK is ramping up its vaccination campaign and PM Johnson is pressured to ease the lockdown. 


Gold extends sideways grind near $1,850

The XAU/USD pair registered small daily gains on Thursday but struggled to extend its recovery amid a lack of significant fundamental drivers on Friday. As of writing, the pair was up 0.15% on a daily basis at $1,849.

Gold news

Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. 

Read more

DXY breaks above key downtrend, eyes move above 91.00

USD has been strongly supported on what has shaped up to be a very much risk off final trading day of the week. Most G10/USD pairs have seen significant weakness, aside from CHF/USD and JPY/USD, given that the two currencies are also considered “safe havens”.

US Dollar Index News

Forex Majors