The U.S. Bureau of Labor Statistics (BLS) will release the December Non-Farm Payrolls (NFP) figures on Friday at 1:30 p.m. GMT.
The US dollar is likely to experience significant volatility as this jobs report will provide crucial clues about how the Federal Reserve will adjust its policy in the new year.
What should retail investors expect from the upcoming Nonfarm Payrolls report?
Economists predict that the number of non-farm jobs will increase by 60,000 in December, following a 64,000 increase in November . During this period, the unemployment rate is forecast to decline slightly to 4.5% from 4.6%, while annual wage inflation – measured by the change in average hourly earnings – is expected to rise to 3.6% from 3.5%.
The monthly report released by Automatic Data Processing (ADP) shows that private sector payrolls increased by 41,000 jobs in December, after a decrease of 29,000 jobs in November.
In addition, the Employment Index in the Services Purchasing Managers' Index (PMI) of the Institute of Supply Management (ISM) rose to 52 after remaining below 50 for six consecutive months, marking a breakout from contraction.
Regarding the jobs report forecast, analysts from TD Securities stated:
“We anticipate new jobs will remain stable around 50,000 over the next two months, with private sector payrolls potentially increasing by 50,000 in December, while the public sector is likely to decrease by around 10,000 jobs during the same period. We also expect the unemployment rate to return to 4.5% after rising to 4.6% due to the temporary lockdowns in November. Average hourly earnings could increase by 0.3% month-on-month and 3.6% year-on-year,” they added.
How will the US non-farm payroll data for December affect EUR/USD?
The US dollar ended the year on an upward trend and remains strong heading into 2026. Although the Fed showed a dovish stance at its December policy meeting, investors still believe it is highly likely that the Fed will keep interest rates unchanged at its January meeting.
According to CME's FedWatch tool, investors are currently pricing in a 25 basis point interest rate cut this month at less than 15%. However, the labor market report could still impact the outlook for a March rate cut, currently priced at around 45%, and could create significant market volatility.
Earlier this week, Richmond Fed President Thomas Barkin said that interest rate decisions would need to be “carefully considered” because there are risks to both unemployment and inflation targets. Barkin also noted that the unemployment rate remains low, but he does not want the job market to deteriorate further.
Meanwhile, Minneapolis Fed President Neel Kashkari said the labor market is clearly cooling down and warned of the risk of a potential "surge" in the unemployment rate. Analysts at Rabobank believe the market will continue to adjust its expectations about when the Fed might cut interest rates again.
“Currently, there is a majority consensus that the Fed will maintain a stable policy this month. In fact, due to internal Chia within the FOMC, the market is still pricing in the risk of this policy extending into the spring. If this week’s Nonfarm Payrolls report is weak, the USD could weaken. However, we expect the USD to continue playing Vai as a safe-haven asset this year, providing momentum for the greenback. Overall, the market could experience significant volatility as major events unfold this year,” they explained.
If the NFP results significantly exceed expectations with a figure above 80,000, along with a decrease in the unemployment rate, investors may lean towards the scenario where the Fed continues to maintain its policy at the March meeting, causing an immediate upward reaction in the USD. In this case, EUR/USD could face strong downward pressure before the end of the week.
Conversely, if the NFP report is disappointing – reaching only 30,000 or less – the USD could be sold off and EUR/USD could have a chance to reverse and rise. Eren Sengezer, head of European analysis at FXStreet, offers a brief technical analysis for the EUR/USD pair:
“The Relative Strength Index (RSI) on the daily chart has fallen below 50 for the first time since late November, and EUR/USD has closed below the 20-day moving Medium (SMA) for four consecutive sessions, indicating mounting downward pressure. If the rate falls below the 100-day moving Medium (SMA), currently at 1.1665, and confirms this as resistance, technical sellers may continue to show interest. In that case, the 1.1600 level (rounded mark) could Vai as temporary support before the 1.1560 area (200-day SMA).”
“On the upside, the 1.1740 level (20-day SMA) is XEM dynamic resistance. If EUR/USD holds above this level, it could regain momentum and head towards the 1.1800 target (rounded level), followed by 1.1870 (rounded level).”
