The US Dollar stayed strong late in the week after the January US labour report. Thursday’s US calendar includes weekly Initial Jobless Claims and January Existing Home Sales.
US Nonfarm Payrolls rose by 130,000 in January, after 48,000 in December (revised from 50,000), beating the 70,000 forecast. The jobless rate eased to 4.3% from 4.4%, and participation rose to 62.5% from 62.4%.
Dollar Reaction And Market Snapshot
The USD Index climbed to about 97.30 after the data, then traded around 97 early Thursday. US stock index futures were up 0.2% to 0.3%.
UK GDP rose 0.1% in the three months to December 2025, matching Q3’s 0.1%. Year-on-year growth was 1.0% in Q4 2025 versus 1.2% expected and 1.2% in Q3 (revised from 1.3%), while industrial and manufacturing output fell 0.9% and 0.5% month-on-month in December; GBP/USD was near 1.3630.
EUR/USD held near 1.1870, while USD/JPY traded below 153.00 at a two-week low. AUD/USD reached about 0.7150 after a 0.7% rise, then stayed above 0.7100; gold held above $5,000.
January’s strong jobs report supports our view that the Federal Reserve will keep policy tight. Nonfarm Payrolls came in well above expectations at 130,000, showing the US economy is still holding up. That backdrop supports a firmer US Dollar. As a result, we may want to position for further dollar gains using options or futures.
Inflation And Policy Implications
The latest Consumer Price Index (CPI) for January 2026 showed headline inflation at 3.1%, still well above the Fed’s 2% target. In late 2025, the Fed repeatedly stressed that inflation was its main focus. This combination of solid job growth and sticky inflation gives the Fed little reason to cut rates soon.
The gap between the US and UK outlook is also clearer. The US labour market looks strong, while UK Q4 2025 GDP rose only 0.1% and December industrial production fell. This weakness suggests GBP/USD may be at risk. We may want to look for chances to take bearish exposure, such as buying pound put options.
Even with broad dollar strength, USD/JPY is at a two-week low below 153.00. This likely reflects growing speculation that the Bank of Japan could move away from negative interest rates, which would support the yen. Because these forces point in different directions, the pair looks higher risk. It may be best to stay cautious until the BoJ gives a clearer signal.
Gold holding above $5,000 stands out in a hawkish Fed environment. A stronger dollar and higher rates often weigh on gold, as they did for much of 2025. Its resilience suggests investors may be using gold as a hedge against stubborn inflation or geopolitical risk. For now, aggressive short positions in gold look risky.
The Australian Dollar is also showing its own strength after hawkish comments from the RBA. With AUD/USD holding above 0.7100, this is a contest between two strong currencies. That can lead to range trading, which may favour strategies that benefit from low volatility, such as selling strangles.
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