How should the USD, US stocks, and gold respond before the Non-Farm Payrolls report?

On December 16th, the U.S. Bureau of Labor Statistics will release key employment data, including the October non-farm payrolls and the full November data, which the market is eagerly awaiting. According to current expectations, October non-farm employment is projected to decline by 10,000 jobs, but November data is expected to rebound strongly, adding approximately 130,000 jobs. This set of data will directly influence the subsequent performance of the US dollar, US stocks, and gold.

However, Citigroup economists have dampened expectations. They point out that the November rebound may mainly be due to seasonal adjustments rather than a substantial improvement in labor demand. Coupled with the complications in data collection caused by the government shutdown, the reference value of this week’s report is somewhat diminished. Kevin Flanagan, Head of Fixed Income Strategy at WisdomTree, also believes that the truly noteworthy NFP data will appear on January 9, 2026, when the full December employment report is released.

Market’s Sensitive Reactions to Three Asset Classes

This NFP report will have a clear impact on three major asset classes. If the data exceeds expectations, the market will reinforce the expectation that the Federal Reserve will keep interest rates high for longer, leading to a strengthening dollar, while US stocks and gold will come under pressure. Conversely, if the data falls short of expectations, easing rate hike expectations will rise, putting downward pressure on the dollar, and gold and US stocks may benefit.

The latest Fed dot plot indicates only one rate cut is planned for 2026. However, traders are more optimistic; according to CME FedWatch Tool, the market currently expects the next rate cut in April 2026, with a 61% probability, suggesting ample pricing for a rate cut cycle. George Catrambone, Head of Fixed Income at DWS Americas, states, “The direction of interest rates will ultimately depend on the strength of the labor market, so the big non-farm payrolls will be a key indicator.”

Diverging Institutional Views: Who Will Dominate the Future of the Dollar?

There are significant disagreements within Wall Street institutions regarding the dollar’s performance in 2026. Morgan Stanley is pessimistic, expecting the dollar to fall by 5% in the first half of next year, indicating ample room for further weakening and believing the market has fully priced in a deeper rate cut cycle.

Citigroup holds the opposite view. They believe the U.S. economy remains fundamentally solid and is likely to continue attracting international capital inflows, which will serve as a strong support for the dollar exchange rate. “We are optimistic about the potential for a dollar cycle recovery in 2026,” Citi’s stance reflects confidence in economic resilience.

Behind this institutional divergence are differing judgments on the U.S. economic outlook, Federal Reserve policy path, and the trajectory of big non-farm payrolls data. After next week’s report is released, the market will have the answer as to whose forecast is closer to reality.