Dollar Strengthens as Jobs Miss and Fed Pause Odds Rise

The dollar rallied on Jan. 9 after U.S. labor-market data showed payrolls disappointed while the unemployment rate "ticked down," reinforcing market expectations that the Federal Reserve will keep interest rates unchanged at its late-January meeting. The dollar index rose to about 98.883 in early Asian trade and later climbed toward the 99 area, reaching roughly 99.15 as the greenback extended gains across major currencies. The move positioned the currency to record a second straight weekly advance.

Labor Department figures showed nonfarm payrolls increased by 50,000 in December, below consensus estimates near 60,000. Weekly initial jobless claims were around 208,000 and announced job cuts fell to 35,553 in December, the lowest monthly total since July 2024. Market participants parsed the soft payroll print as noisy rather than definitive: Steve Englander, head of global G10 FX research at Standard Chartered, highlighted that the standard error for nonfarm payrolls is about 20,000 and suggested markets may not overreact to the headline miss.

Traders moved quickly to price the monetary-policy implications. Fed-funds futures implied roughly an 89 percent probability that the Fed will hold rates at its Jan. 27-28 meeting, up from about 68 percent a month earlier. That shift in expectations has supported the dollar by reducing near-term prospects for further policy tightening and reinforcing a premium on U.S. safe-haven assets as investors weigh the timing of eventual rate cuts later in the year.

Across spot markets, USD/JPY traded around the mid-150s, quoted near 156.9 in early Asian trade and reported nearer 158 at times, while EUR/USD sat around $1.1633 and GBP/USD near $1.3403. The offshore yuan changed little around 6.98 per dollar, USD/CAD was about C$1.39 and USD/CHF near 0.801-0.802. Commodity-linked currencies underperformed, with AUD/USD at roughly $0.6675. Bitcoin was trading near $91,300.

Beyond labor data and Fed pricing, markets marked a high-stakes legal variable: the Supreme Court is considering whether the president can use the International Emergency Economic Powers Act to impose tariffs without congressional approval. A ruling against that authority could complicate U.S. trade policy, upend negotiations and potentially prompt companies and customs brokers to seek as much as $150 billion in refunds for duties already collected. Timing of a decision remained uncertain, leaving firms and markets on alert for an outcome that could materially affect trade flows and FX volatility.

Global developments added nuance. Japanese household spending surprised to the upside for November and the Bank of Japan has tightened policy, with Governor Kazuo Ueda saying "the central bank would continue raising borrowing costs if economic and price developments moved in line with its forecasts." Chinese inflation data due this week and signs of easing inflation in Europe are additional near-term catalysts.

In the coming days, markets will track follow-up U.S. labor and inflation releases, any Supreme Court statement or ruling, and further shifts in Fed-rate pricing. Together, those data and policy events will determine whether the dollar's recent strength endures or reverses as investors recalibrate growth, inflation and policy risk.