NFP Quick Analysis: Expect more dollar falls as the Fed may cut rates

  • US Non-Farm Payrolls figures have disappointed with 145,000 jobs gained.
  • Fed officials may reconsider their stance.
  • The US dollar has room to fall if such figures persist.

America is still hiring – but offers fewer jobs with lower pay. The Non-Farm Payrolls report for December 2019 has dropped below expectations with an increase of 145,000 against 164,000 expected and higher whisper numbers – given upbeat data leading into the event. Moreover, downward revisions to previous months shed 15,000 jobs.

Worse, Average Hourly Earnings rose by only 0.1% monthly and slipped below 3% yearly – they stand at 2.9% against 3.1% expected.

Will the Fed cut rates?

The US dollar dropped in the immediate aftermath, but there may be more in store. 

The Federal Reserve has two mandates: employment and inflation. The bank seems to have given up on price rises. Jerome Powell, Chairman of the Federal Reserve, said he first wants to see a significant and sustainable increase in inflation before raising rates. John Williams, President of the New York branch of the Federal Reserve, indicated that the bank would have to live with low inflation.

The wage figures seem to vindicate the pessimistic stance on inflation. Without rising pay, prices may remain stuck for some time. 

Yet also the job front is not exactly satisfactory. 2019 has seen the slowest gain in jobs since 2011 – in the depth of the crisis. While some attribute this to the US nearing full employment, the low participation rate – stuck at 63.2% – does not support this theory. Moreover, textbook economics suggest that wages should rise when employers find it hard to find workers – and salaries are stuck as well.

The next Fed decision is on January 29. While Powell and co. are expected to leave rates unchanged, this jobs report may give them pause for thought – perhaps signaling the end of their pause. 

And if expectations for a rate cut increase, pressure on the dollar may follow. This retreat may be the beginning, not the end of the response to December's NFP. 


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 Forex Analysis

Editors’ Picks

USD/JPY keeps losses on 107.00 after China rate cut

USD/JPY continues to trade in the red as the rate cut by China has failed to bring cheer to the equity markets. China's rate cut and liquidity infusion have failed to put a bid under the risky assets. The Anti-risk Yen remains better bid and is keeping USD/JPY on the defensive.


AUD/USD: Reverses lower from 0.6184, Friday's close pivotal

With the US dollar again attracting haven bids on coronavirus pandemic fears, the AUD/USD pair is feeling the pull of gravity on 0.6100 in Asia. Global markets continue to struggle as the virus outbreak in the US worsened over the weekend. 


Gold declines in Asia as dollar catches bid

Gold is entrenched in the negative territory in Asia as the US dollar, the shiny metal's biggest nemesis, is benefitting from the renewed risk aversion in the equity markets.    China's reverse repo rate cut fails to restore risk sentiment and put a bid under the shiny metal. 

Gold News

WTI: Bears dominate below 13-day-old resistance trendline

While following a short-term falling trend line resistance, WTI drops to $22.000 amid the early Monday. In doing so, the energy benchmark remains near multi-year low amid the bearish MACD. $20.00 becomes the key for sellers ahead of targeting the three-week-old descending trend line.

Oil News

USD/CNH: Extends recovery gains beyond 7.1050 after PBOC rate cut

USD/CNH takes further measures after China’s central bank took steps to combat the coronavirus (COVID-19). PBOC cuts seven-day reverse repo rate, Moody’s cited weakness of China’s shadow banking industry.

Read more

Forex Majors