On the side of the stronger dollar, rising US bond yields have been providing support. The FOMC meeting minutes indicated a view that high-interest rates could persist for a longer period. Despite expectations of rate cuts by the end of the year, the impact was not as significant as the dovish shock during the FOMC meeting. However, some analysts suggest that adjustments may be seen in the recent downward trend of the US dollar as the release of the US employment report approaches.
Regarding yen depreciation, unclear statements by BOJ Governor Kuroda have dulled market expectations of an early removal of negative interest rates. Additionally, the Noto Peninsula Earthquake on January 1st has further weakened these expectations. The rise of cross-yen pairs, along with USD/JPY, indicates a yen weakening trend.
Today, the December US employment report will be released. The consensus estimate for non-farm payrolls is an increase of 175,000 jobs, slightly lower than November’s 199,000, with a range of market estimates generally between 90,000 and 150,000. Any result significantly deviating from this range is likely to have a big impact on the dollar. The unemployment rate is expected to be 5.9%, a slight increase from the previous 5.8%. Average hourly earnings are forecasted to increase by 0.3% month-on-month and 3.9% year-on-year, both slightly slower than the previous month.
Other economic data releases include German retail sales (November), Eurozone HICP inflation (flash estimate, December), Eurozone producer price index (November), Canadian employment report (December), US manufacturing new orders (November), US ISM non-manufacturing PMI (December), and Canadian Ivey PMI (December).
In terms of speeches, there is a scheduled speech by the Richmond Fed President, with a Q&A session.
The situation currently indicates strong buying of the US dollar. While the plan was to go short on the dollar this week, considering the strong dollar buying, a more flexible approach with both dollar buying and selling is in mind.
The focus is on the release of the US unemployment rate and non-farm payrolls (NFP) data. Keep an eye on the market’s reaction after this release.
