The U6 underemployment rate in the United States rose from 8% to 8.7% in November. This change highlights larger issues in the labor market that go beyond the official unemployment statistics. In December, the US S&P Global Manufacturing PMI dropped to 51.8, and the Services PMI fell to 52.9. Retail sales in the US were nearly unchanged at $732.6 billion in October, missing the expected 0.1% increase.

Currency Movements

The weak USD affected currency movements, with GBP/USD climbing over 1.3430. Similarly, EUR/USD reached a three-month high following a drop in nonfarm payrolls by 105,000 in October, followed by an increase of 64,000 in November. Gold prices surged above $4,300, driven by the weaker USD and disappointing employment and PMI data. Meanwhile, BNB fell below $855 due to negative momentum indicators and increased retail activity. Global tensions and economic events also impacted the markets. Peace talks between Russia and Ukraine were noted, along with economic challenges in Venezuela. FXStreet offers market insights but urges thorough research before making investment decisions. The rise in the U6 underemployment rate to 8.7% indicates that the US labor market is in worse shape than it appears. Historically, this broader measure of unemployment serves as an early warning sign of economic issues. Coupled with stagnant retail sales and declining PMIs, it shows a clear slowdown as we approach the new year.

Federal Reserve Rate Cuts

The current trend of weakening data increases the likelihood of Federal Reserve interest rate cuts in the first half of 2026. This uncertainty presents opportunities, suggesting we consider strategies that benefit from rising market volatility, such as buying call options on the VIX. A similar situation occurred in 2019 when slow growth forced the Fed to change direction, causing sharp market reactions. With soft US jobs data, the US Dollar is expected to remain under pressure in the coming weeks. We are already witnessing this, as the Euro and Pound Sterling are rallying against the dollar. Using derivatives to take advantage of this trend, like buying EUR/USD call options or shorting US Dollar Index futures, seems to be a straightforward approach. Gold’s rise above $4,300 is a typical reaction to a declining dollar and economic uncertainty. We can maintain long exposure through futures, as ongoing geopolitical risks related to Russia and Ukraine could support prices. However, for stock indices, caution is advised; while potential rate cuts may be bullish, weakening economic activity is bearish, making protective put options a wise hedge for any existing long positions. Create your live VT Markets account and start trading now.

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