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The U.S. dollar index continues to rise as the market awaits heavy U.S. non-farm payroll data
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Hello everyone, today XM Forex will bring you "[XM Group]: The U.S. dollar index continues to rise, and the market is waiting for the U.S. heavy non-agricultural data." Hope this helps you! The original content is as follows:
In Asian trading on Friday, the U.S. dollar index fluctuated higher. The U.S. dollar rose against the euro and Swiss franc on Thursday, and the U.S. dollar index hit a new high in the past month. Investors are awaiting Friday's key U.S. nonfarm payrolls report to assess labor market conditions and the outlook for interest rates.
Analysis of major currency trends
U.S. dollar: As of press time, the U.S. dollar index is hovering around 98.91. U.S. economic data has limited the decline of the U.S. dollar, but has put pressure on G10 foreign exchange currencies. The recent increase in buying of U.S. debt has radiated to the U.S. dollar. Faced with the United States' increasing geopolitical exposure, the market tends to allocate more U.S. dollars and U.S. debt in response. At the same time, the recent employment data in the United States is not good, but the dollar is rising instead, which confirms that the focus of recent market transactions is on the geopolitical issues between the United States and Venezuela. Market participants maintain a wait-and-see attitude before the release of the non-farm payrolls report (NFP). On the one hand, there are downward concerns about the slowdown of the U.S. economy, and on the other hand, the support logic of the dollar's safe-haven attribute, the two form a delicate balance. Technically, the U.S. dollar index has seen signs of a sustained rebound after rising above 98.63. 98.90 is the key pressure level above. If it can rise above 98.90 and stabilize, the rebound pattern will be established and the U.S. dollar index will start to strengthen again.



1. U.S. Treasury Secretary: The United States will lift some sanctions against Venezuelan entities
On the 8th local time, U.S. Treasury Secretary Bessent said that the United States will lift some sanctions against Venezuelan entities. Regarding future issues related to the "management" of Venezuela by the United States, Bessent said that it hopes to stabilize Venezuela's existing structure. Regarding the issue of assets in Venezuela, Bessent said that the U.S. Treasury Department will be responsible for supervising the sale of assets in Venezuela and returning the proceeds to Venezuela according to the instructions of U.S. Secretary of State Rubio. Bessant also said independent oil www.xmtraders.companies are interested inInvesting in Venezuela, major oil www.xmtraders.companies may act more cautiously in Venezuela.
2. Trump: "Decided" on the candidate for chairman of the Federal Reserve
According to reports, President Trump said that he has finalized the nominee for the next chairman of the Federal Reserve, but in a wide-ranging interview, he did not disclose the specific nominee. "I've made a decision in my mind," he said in an interview Wednesday night. "I haven't talked to anyone about it yet." When asked specifically about his chief economic adviser Kevin Hassett, Trump said "I don't want to disclose it," but described Hassett as "definitely one of the people I admire." Whoever Trump ultimately nominates will inherit an institution at a critical juncture, with the Fed under intense pressure from a president bent on driving down borrowing costs sharply. Federal Reserve Chairman Jerome Powell, whose term will expire in May next year, has long been the target of Trump's frequent attacks. This also indicates that the next chairman will face a storm of public opinion if he cannot meet the president's demands.
3. Report: The Trump administration is considering funding Greenland’s admission to the United States
Sources revealed that US officials have discussed relevant plans and plan to provide each Greenlander with US$10,000 to US$100,000 in exchange for the other party’s support for Greenland’s separation from Denmark and consideration of establishing an affiliated relationship with the United States. The plan is part of a series of related discussions at the White House that also cover options such as military means and the Agreement of Free Association. Polls show that although the majority of Greenlandic people support independence, the vast majority do not want to join the United States, and the specific implementation details and terms of relevant financial assistance are still unclear.
4. Government funds will be exhausted again, and the U.S. House of Representatives passed three appropriation bills
On January 8, local time, the U.S. House of Representatives passed three government appropriation bills, taking another step forward for the federal government to obtain funds before the shutdown deadline of January 30. What was passed that day was a package of appropriations bills, known as the "mini-consolidation bill." The bill would provide funding for the Departments of Energy, www.xmtraders.commerce, Justice, water projects, the Environmental Protection Agency (EPA), and federal research programs until the end of the fiscal year. The related bill is expected to be submitted to the Senate for consideration next week. Senate Majority Leader John Thune said the appropriations bill package could be considered as soon as next week.
5. Non-farm payrolls report and Fed policy expectations
The market generally expects that the non-farm payrolls report will show that the number of new jobs has slowed to about 55,000, a further drop from 64,000 in the previous month, and the expansion momentum of the job market continues to weaken. If the non-farm payrolls report falls short of expectations (new jobs are less than 50,000 or the unemployment rate rises more than expected), it will directly increase the market's bets on the Federal Reserve's aggressive interest rate cuts, put significant downward pressure on the US dollar, and may even trigger DXY to fall below the key support level of 98.50. Fed officials including Stephen Milan, Neel Kashkari have releasedThe release of a dovish signal that pays more attention to economic growth further strengthens the market's pricing of loose monetary policy, paving the way for a weakening of the U.S. dollar in the medium term.
Institutional View
1. Fitch Ratings: The Federal Reserve is expected to cut interest rates twice in the first half of the year and the unemployment rate may stabilize at 4.6% this year
Fitch Ratings has raised its 2025 U.S. GDP growth forecast and 2026 growth forecast. The adjustment was made after including economic data delayed due to the government shutdown late last year. Fitch now expects GDP growth of 2.1% in 2025, up from the 1.8% forecast in its December 2025 Global Economic Outlook (GEO). At the same time, the growth forecast for 2026 was raised to 2.0% from 1.9% in the last report. Given the incomplete data for October, the recent CPI inflation trend is difficult to interpret. Inflation is estimated to rise to 3.0% in December 2025 (from 2.7% in November) and will rise further in 2026 due to delays in tariff transmission, reaching 3.2% by the end of the year. As the impact of slower job growth is offset by lower labor force growth, the unemployment rate is expected to average 4.6% in 2026, close to recent levels. We expect the Fed to cut interest rates twice in the first half of 2026, lowering the federal funds rate (ceiling) to 3.25%.
2. www.xmtraders.commerzbank: Entry into the single market is expensive and sterling bulls have encountered cold water
Michael Pfister of www.xmtraders.commerzbank pointed out in the report that sterling investors should not prematurely digest expectations that UK-EU relations may improve. He said an easing of ties was unlikely to happen quickly because access to the EU's single market was usually only granted if Britain made concessions. In addition, he pointed out that some of the problems in the UK (such as low productivity) began long before Brexit. While the pound will rise if conditions for access to the EU single market do improve, it is "too early to price in potential positive outcomes" at this time. The UK is currently preparing a bill aimed at bringing the country's laws into line with EU law.
3. XS.com Brokerage www.xmtraders.company: If there are cracks in the labor market, the dollar’s rise may be short-lived
Rania Gule, an analyst at XS.com Brokerage www.xmtraders.company, said that unless Friday’s non-farm payrolls report is stronger than expected, the current rise in the dollar may be limited and only temporary. She noted in the note that the dollar is "in a fragile position" and any signs of further labor market weakness could push it lower. She believes that the dollar's modest gains despite recent weak data indicate that investors are more inclined to wait and see until the outlook becomes clearer. This behavior reflects a temporary balance between concerns about a U.S. economic slowdown and the dollar's safe-haven role, which could "quickly break down with any unexpected moves in labor market data."
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