US dollar gains on surging T-yields, strong NFP data

The US Dollar Index has soared to the 104.05 mark, driven by positive labor market cues and a surge in yields, suggesting that markets are delaying rate cuts in 2024.

The gains were fueled by economic reports from November, including Average Hourly Earnings, Unemployment Rate, and Nonfarm Payrolls, which collectively fueled hawkish bets on the Federal Reserve.

Despite moderate US inflation figures from October fueling dovish expectations regarding the Federal Reserve’s stance at the beginning of November, Fed officials’ signals considering further tightening are dampening these expectations.

Strong labour market data reaffirms the bank’s cautious stance, requesting further evidence on the economy cooling down. The upcoming inflation data from November and the Fed meeting next week will be critical determinants for the USD’s short-term trajectory.

The US Bureau of Labor Statistics reported a better-than-expected increase of 0.4% in November’s Average Hourly Earnings MoM figures, surpassing consensus and previous numbers of 0.3% and 0.2%, respectively. Nonfarm Payrolls for November showed 199K new jobs added to the US economy, surpassing consensus expectations of 180K and the preceding number of 150K jobs.

The Unemployment Rate came in at 3.7%, lower than the anticipated figure of 3.9%. The market expects no rate hike in the December Fed meeting but anticipates less easing in 2024.