Non-farm data is about to trigger the market! Will the next interest rate cut cycle save the US stocks and gold?

U.S. economic data will trigger a new wave of ripples. After the government reopened on December 16, the first major employment report is about to be released, which will include the October data revision and the full disclosure of November data. The market generally expects October non-farm payrolls to decline by 10,000, but November data is expected to show a strong recovery, adding 130,000 jobs.

Is the seasonal adjustment effect real demand recovery?

Citigroup’s economists have cast doubt on this rebound, pointing out that this rise may be more due to the routine practice of annual seasonal data adjustments rather than a genuine improvement in labor market demand. In other words, behind the impressive numbers, there may not be an underlying optimistic employment fundamental.

Subtle divergence between Fed rate cut expectations and official guidance

The latest dot plot from the Federal Reserve depicts a cautious rate cut blueprint—only one rate cut planned for the entire 2026. However, Wall Street traders are betting on a completely opposite story: they expect the Fed to cut rates twice next year, one more cycle than the official hint.

According to real-time data from the CME FedWatch tool, the market generally predicts the next rate cut window to be in April 2026, with the probability of a rate cut rising to 61%. George Catrambone, head of fixed income at DWS Americas, emphasized: “The performance of the labor market will determine the future direction of interest rates, making this Tuesday’s non-farm payroll data a crucial barometer.”

Data fog caused by government shutdown

However, Kevin Flanagan, head of fixed income strategies at WisdomTree, remains cautious, believing that the reference value of this week’s report may be limited. The government shutdown has disrupted data collection procedures, prompting him to focus more on the report expected early next month. January 9, 2026, will be a key date, when the U.S. Bureau of Labor Statistics will release the full data for December non-farm payrolls.

Chain reactions of three market scenarios

The strength or weakness of the non-farm payroll data will trigger very different market reactions: if employment data exceeds expectations strongly, it will reinforce market bets on the Fed delaying rate cuts, thereby pushing up the dollar index, while U.S. stocks and gold face downward pressure. Conversely, if the data underperforms, rate cut expectations will be reignited, the dollar will come under pressure, and U.S. stocks and gold could benefit from a loose liquidity environment.

Morgan Stanley analysts predict that the dollar will depreciate by 5% in the first half of 2026, implying there is ample room for the market to reprice a deeper rate cut cycle.

Bull and bear divergences still exist

However, Citibank’s view is on the opposite side. They believe the U.S. economy remains resilient and strong, and this internal strength will continue to attract global capital flows northward, providing solid support for the dollar exchange rate. “We judge that the 2026 dollar cycle has strong potential for rebound and recovery,” Citibank’s conclusion shows confidence in the dollar bulls.

In short, the future trajectory of the dollar, U.S. stocks, and gold will still be unlocked by the non-farm employment report, and market participants need to closely watch the upcoming economic data.