Federal Reserve Bank of San Francisco President Mary Daly highlighted a possible change in the job market, moving from low hiring and firing to a situation with no hiring and more layoffs. She stressed that it’s crucial to keep both price stability and full employment to fulfill the Fed’s goals. The US Dollar showed mixed results against major currencies. It was strongest against the Japanese Yen but weakened compared to the Euro and Canadian Dollar. The accompanying heat map displays percentage changes of major currencies, with USD/JPY showing a slight change of 0.03%.

Market Analysis by Agustin Wazne

Agustin Wazne reported for FXStreet on commodities and key currencies, including related information on exchange rates and market trends. Several important market updates were mentioned. These include shifts in EUR/USD, GBP/USD, and gold prices. Gold prices crossed $4,900 per troy ounce as traders moved towards safer assets during uncertain times. In the cryptocurrency market, Bitcoin and Ethereum rebounded despite a $2.6 billion liquidation wave. XRP experienced a notable increase of over 10%, reaching $1.35 as traders adjusted their positions after a week of volatility. We need to closely monitor the Federal Reserve’s dual goals, especially as attention shifts toward employment. There is a worry that a stable but sluggish job market could deteriorate, potentially leading to more layoffs and fewer job openings. This concern is creating a cautious outlook for Fed policies in the coming weeks. Recent data supports this view. At the end of 2025, the number of job openings (JOLTS) continued to decline. The January 2026 employment report indicated that job creation was slowing, barely matching population growth. Additionally, the unemployment rate slightly increased to 4.1%, reinforcing the idea that the labor market is losing its strength.

Inflation Considerations

On another note, inflation has become less concerning, giving the Fed more leeway to respond if the job market weakens. The Fed’s preferred inflation measure, core PCE, ended 2025 at 2.8% year-over-year, continuing the disinflation trend observed throughout the year. With price stability appearing more attainable, the Fed can prioritize addressing potential job losses. For derivative traders, this suggests preparing for a weaker US Dollar and greater market volatility. Fed funds futures now forecast more than a 65% chance of a rate cut in March 2026, which may further weigh on the dollar. Buying call options on EUR/USD and AUD/USD could be effective as these currencies have shown strength against the greenback. The labor market uncertainty could lead to increased volatility in equities. Traders should consider strategies that benefit from larger price fluctuations in any direction. Buying VIX futures or using straddles on major indices like the S&P 500 can safeguard against sudden downturns or allow profits from sharp rebounds if the Fed hints at an imminent rate cut. While the dollar is weakening against many currencies, its strength against the Japanese Yen presents a unique opportunity. This is due to the Bank of Japan’s consistently dovish stance, which results in a significant interest rate difference. A pair trade, such as being long AUD/USD while also being long USD/JPY, could take advantage of the dollar’s overall weakness alongside the ongoing weakness of the yen. Create your live VT Markets account and start trading now.

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