US employment data fluctuates wildly: the USD, US stocks, and gold triangle game

Traders are all watching a report. On December 16th, the U.S. Bureau of Labor Statistics will release employment data for the first time after the government shutdown, including October non-farm payrolls and the full November figures. The market expects November employment to rebound to 130,000 jobs, while October may have declined by 10,000.

But don’t be fooled by the surface numbers. Citigroup economists point out that this rebound largely results from seasonal adjustments rather than a genuine improvement in labor demand. This detail is crucial — because it will directly influence the Federal Reserve’s judgment on the path of interest rate cuts.

The Interaction Between Rate Cut Expectations and U.S. Employment Data

The latest FOMC dot plot signals only one rate cut scheduled for 2026. However, traders’ bets are different; they expect two rate cuts next year. According to CME FedWatch Tool, the market is currently pricing in a 61% probability that the Fed will cut rates next in April 2026.

This discrepancy highlights the issue. As George Catrambone, Head of Fixed Income at DWS Americas, said, “Interest rate trends are closely linked to the labor market. This week’s U.S. employment data will be decisive.”

However, some voices advise lowering expectations. Kevin Flanagan, Head of Fixed Income Strategy at WisdomTree, believes that data collection during the government shutdown was difficult, limiting the credibility of this report. The real test will come on January 9, 2026, when the U.S. Bureau of Labor Statistics releases the December employment report.

How the U.S. Dollar, U.S. Stocks, and Gold Will Respond

This U.S. employment data will serve as the market’s compass.

If the data is strong, traders will push up expectations for the Fed to maintain high interest rates, strengthening the dollar, while gold and U.S. stocks will come under pressure and decline.

If the data appears weak, the market will increase bets on rate cuts, the dollar will weaken, and gold and U.S. stocks will have opportunities to rise.

Morgan Stanley and Citigroup have opposite long-term views. Morgan Stanley expects the dollar to fall 5% in the first half of next year, believing the market has enough room to price in a deeper rate cut cycle. Meanwhile, Citigroup is optimistic about the dollar’s recovery potential, believing the U.S. economy remains strong and will continue to attract international capital flows, supporting the dollar exchange rate.

The ultimate answer to this tug-of-war among assets lies in the U.S. employment data on December 16th.