The US Dollar experienced a significant surge following the release of the Non-Farm Payrolls (NFP) report, which exceeded estimates by showcasing the addition of 353,000 new jobs in January compared to the expected 180,000. The previous month’s figures were also revised higher from 216,000 to 333,000. Despite this robust performance in the job market, the unemployment rate remained unchanged at 3.7%.
Prior to the NFP release, the US dollar was under pressure as increased demand for US Treasuries led to a decline in yields. Concerns over US regional banking, particularly highlighted by a significant drop in shares for New York Community Bancorp, fueled demand for the safe-haven US dollar.
After the release, the US dollar index rose approximately 50 ticks, erasing earlier losses and returning to a range-bound state. The greenback may soon test the double highs around 103.83/85 observed in recent weeks.
The expectations for a US rate cut in March have diminished to less than 20% post-release, down from 35% before the data. Furthermore, the probabilities for a rate cut in May have reduced slightly to 77%, compared to the earlier high 80s.
Amidst the strengthening US dollar, gold is likely to face headwinds, potentially leading to a decline in its value. Gold prices are often inversely correlated with the US dollar, and a stronger greenback may limit the appeal of the precious metal in the short term.
