Recent weakness in the US Dollar looks driven more by market sentiment than by economic data. Focus has now shifted to the US jobs report, which could change expectations for near-term rate cuts and move the DXY index.
ING forecasts 80k non-farm payrolls, versus a 65k consensus. Bloomberg’s “whisper number” dropped from 50k to 37k after comments on Monday from Kevin Hassett.
Jobs Report In Focus
A much weaker payrolls number could lead markets to price in an April rate cut and push DXY toward 96.0 in the coming days. The unemployment rate is expected at 4.4%.
The consensus expectation for the 2025 payroll revisions is -825k. ING does not expect large negative revisions or a rise in unemployment.
US retail sales for December were flat month-on-month, versus expectations for a 0.4% rise. This suggests real sales volumes fell.
We saw a similar setup in early 2025, when a key jobs report was expected to steer the dollar after a weak stretch. Now, the January 2026 payrolls report looks just as important, especially with DXY recently slipping to around 101.50. This release will be a major test for the dollar in the near term.
Positioning Around The Release
A very weak result, perhaps below 100k, would likely strengthen expectations for a Federal Reserve rate cut by the June meeting. Futures markets already put the odds above 50%. That could send DXY toward the 100.00 psychological support level in the weeks ahead. The consensus forecast is a modest 160k gain, which already points to a clear slowdown.
If the report is stronger than expected, for example above 200k, some of the recent negativity around the dollar should ease. Still, as in 2025, the conditions for a lasting recovery do not seem to be in place. The unemployment rate has already risen to 4.0%, and retail sales have been soft, so any boost may not last.
For derivatives traders, buying volatility in major dollar pairs may make sense ahead of the release. Options strategies such as straddles could benefit if the market moves sharply in either direction. Given the weak underlying tone, some may also consider selling short-term dollar strength with call options, assuming any rally fades quickly.
The dollar’s recent slide was not triggered by one data point, but by a broader shift in sentiment. As a result, even a strong jobs report may only produce a brief bounce before attention returns to the bigger trend. Traders should be cautious about chasing a rally with longer-term positions.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
