In December, average hourly earnings in the United States increased by 3.8% compared to last year, exceeding the expected 3.6%. The US Nonfarm Payrolls report had mixed effects on financial markets, impacting different currency and commodity trends. The US Dollar performed strongly, affecting various currency pairs. For instance, USD/CAD rose due to labor data and pressures on the Canadian Dollar from oil prices. Similarly, USD/JPY approached a one-year high as expectations for immediate Federal Reserve rate cuts diminished.

Steady Commodities

In the commodity market, gold remained stable near its yearly high of $4,500, even with a stronger dollar. In contrast, cryptocurrencies like Bitcoin and Ethereum faced selling pressure due to reduced interest from institutions and ETF outflows, with Bitcoin holding at $90,000 and Ethereum above $3,000. Next week, attention will likely shift to US consumer price index (CPI) figures and global political dynamics. XRP saw downward pressure in a risk-averse market amidst weaker retail demands. Various broker guides for 2026 provide insights into trading strategies and top brokers in different categories and regions. The surprising wage growth of 3.8% for December 2025 changes the outlook for the weeks ahead. It implies that the Federal Reserve may be less likely to lower interest rates in January. Historically, similar strong labor market reports in 2024 and 2025 forced the Fed to adopt a cautious approach. This suggests that the US Dollar will likely remain strong against major currencies. Rate expectations are shifting quickly; just last week, futures implied a 65% chance of a January cut, but that figure has now dropped to below 25%. Therefore, we should favor long dollar positions against currencies like the Euro and British Pound.

Impact on Interest Rate Traders

For interest rate traders, this scenario emphasizes a “higher for longer” outlook. The 2-year Treasury yield, which jumped sharply on this news, is crucial to monitor as it reflects the Fed’s near-term policy. We should explore options strategies to protect against persistently high or even rising yields. In the stock market, this news is challenging, particularly for growth and tech stocks that react strongly to interest rates. The CBOE Volatility Index (VIX) has lingered at a low level of 14, indicating that market insurance is relatively affordable. This presents an opportunity to purchase put options on indices like the S&P 500 to hedge against potential declines. Gold’s strength, despite the rising dollar, points to other risk factors in the market, possibly linked to geopolitical tensions. This unusual behavior suggests we shouldn’t short all assets. Holding positions in gold, perhaps via call options, could be a useful hedge against unexpected economic shocks. All attention is now on next Tuesday’s Consumer Price Index (CPI) report. If inflation exceeds expectations, it will confirm the wage data and likely intensify these market trends. We must stay agile and prepare for increased volatility around the release. Create your live VT Markets account and start trading now.

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