Today’s markets analysis on behalf of Joseph Dahrieh, Managing Principal at Tickmill
The US dollar was broadly flat on Friday, while treasury yields were mixed across the curve. Market participants could remain cautious ahead of a dense calendar of US macroeconomic releases next week that could shape expectations for both the dollar and interest rates into 2026.
Attention will turn first to Tuesday’s ISM Manufacturing PMI for December, which is expected to edge higher but remain firmly in contraction territory. On Wednesday, focus shifts to the ISM Services PMI, where a modest decline of around 0.4 points to 52.2 is anticipated, alongside the JOLTS report, with job openings forecast to rise slightly to 7.73 million. The week culminates with the nonfarm payrolls report, where job growth is expected to slow to around 55,000 from 64,000 previously.
Any evidence of weakening labour market conditions or fading economic momentum would likely reinforce expectations of a more dovish Federal Reserve stance in 2026, weighing on both the dollar and yields. Conversely, resilience in employment or economic activity could temper easing expectations and provide renewed support.
Additionally, the uncertainty over the future leadership of the Federal Reserve could remain a source of risk. President Donald Trump is expected to announce a successor to Jerome Powell early this year. Traders are currently pricing in two rate cuts later this year, in contrast to the single cut projected by the Fed.