- Continued strength in the US labor market fuels expectations of a more restrictive Federal Reserve policy path in 2025.
- Investors rotate into the dollar as high Treasury yields attract global capital, driving the US Dollar Index to new cycle peaks.
- Markets anticipate the Fed will maintain its 4.25%-4.50% rate range this month, postponing further cuts as inflation concerns persist.
The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, sees gains for the fifth consecutive session on Monday against almost all major G20 pairs. Markets are rebalancing for tighter Federal Reserve (Fed) policy in 2025 after the latest US jobs report.
The DXY briefly touched 110.00 and looks to consolidate at these elevated levels as the Dollar maintains its bullish position given last Friday’s strong Nonfarm Payrolls (NFP) data and the Fed’s cautious approach to easing seen in the Meeting Minutes from last week.
Daily Market Summary: US Dollar Sees Gains on Strong NFP Report
- Strong US data and hawkish Fed officials continue to push the US Dollar to new cycle highs with robust December NFP numbers underscoring the resilience of the labor market.
- Non-Farm Payrolls for December grew by 256,000, exceeding the consensus of 160,000, while the Unemployment Rate fell to 4.1%. Wage inflation slowed slightly to 3.9% year-on-year.
- The New York Fed Nowcast points to 2.4% SAAR growth in the fourth quarter, up from 1.9% last week, while first-quarter estimates rose to 2.7% from 2.2%. The Atlanta Fed’s GDPNow model tracks the fourth quarter around 2.7%.
- The Fed is set to keep rates steady this month as policymakers signal diminished urgency for additional cuts, citing continued labor market momentum and growth through 2025.
- The December Consumer Price Index will be released this week, and its outcome will dictate market price dynamics as well as the Fed’s rate bets.
DXY Technical Outlook: Index nears 110.00, giving off overbought signals
The US Dollar Index has risen to its highest level since November 2022, briefly testing the 110.00 threshold. Momentum indicators are approaching overbought territory, suggesting a possible short-term pause or shallow pullback. Still, strong jobs numbers and the Fed’s hawkish bias reinforce the US dollar’s bullish trajectory. If profit-taking intensifies, support could emerge around the 108.50–109.00 zone, providing a buffer for the ongoing uptrend.
US Dollar FAQs
The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling as the world’s reserve currency.
The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.
Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.
Source: Fx Street

I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.