December Non-Farm Payrolls report will trigger three major asset fluctuations, with divergent outlooks for the US dollar

The upcoming employment data from the U.S. Bureau of Labor Statistics has become a recent market focus. The report released on December 16 will cover the October non-farm payrolls and the complete November non-farm payroll data, with the November figures being particularly critical.

Market Expectations and Seasonal Factors Intertwined

Analysts expect October non-farm employment to decrease by 10,000 jobs month-over-month, followed by a significant rebound in November with an increase of 130,000 jobs. However, economists warn that this rebound may mainly result from seasonal adjustment effects rather than a genuine improvement in labor market demand. The research team at Citigroup pointed out that superficial data reconstruction cannot reflect the true state of the employment market.

Disruptions caused by the government shutdown in data collection should not be underestimated. Kevin Flanagan, Head of Fixed Income Strategy at WisdomTree, believes that this week’s report has limited reference value. The market should focus on the December non-farm payroll report scheduled for January 9, 2026, which will be based on a more complete statistical foundation.

Timing Discrepancy in Rate Cut Expectations

The latest dot plot signals from the Federal Reserve indicate only one rate cut planned for 2026, but traders are betting on two rate cut opportunities. According to data from the CME FedWatch Tool, the market expects the next rate cut to occur in April 2026, with a probability of 61%, which is more optimistic than the official timetable hinted at by the Federal Reserve.

George Catrambone, Head of Fixed Income at DWS Americas, stated that the trajectory of the labor market will determine the interest rate path. Therefore, this week’s non-farm data is an important window to observe the Fed’s policy inclination. Morgan Stanley further predicts that the U.S. dollar will depreciate by about 5% in the first half of 2026, implying that the market is pricing in ample room for a rate cut cycle.

Conversely, Citigroup economists hold a different view, believing that the U.S. economy’s fundamentals remain robust and are expected to continue attracting overseas capital allocations, thereby supporting the dollar exchange rate. They judge that the 2026 dollar cycle has recovery potential.

Non-Farm Data Will Decide the Direction of the Three Major Assets

If the employment report exceeds expectations, it will strengthen the Fed’s signal to maintain high interest rates, thereby supporting the dollar’s appreciation and suppressing the performance of U.S. stocks and gold.

Conversely, if the data falls short of expectations, the market will reinforce rate cut expectations, leading to dollar depreciation pressures, while gold and U.S. stocks will benefit. This binary outcome makes the non-farm data a trigger point for market volatility in the coming weeks, and investors should closely monitor it.