Non-farm data triggers market expectations gap: USD, US stocks, and gold will diverge in their trends

The US employment data to be announced on December 16th is highly anticipated. This report will cover the October non-farm payroll data and the complete information for November non-farm payrolls, with market expectations for its subsequent impact showing clear divergence.

According to market consensus, October non-farm employment is expected to decrease by 10,000 jobs, while November is forecasted to rebound strongly with an increase of 130,000 jobs. However, Citigroup economists have dampened expectations, believing that this rebound mainly results from seasonal adjustments rather than a genuine improvement in labor market demand.

Federal Reserve Rate Cut Timeline Shows Variance

The latest FOMC dot plot reveals an important signal: only one rate cut is planned for 2026. However, traders are more optimistic, betting that the Federal Reserve will initiate two rate cuts next year, exceeding the official hints.

Data from the CME FedWatch Tool shows that the market currently expects the next rate cut by the Federal Reserve to occur in April 2026, with a 61% probability. Rate decisions are closely tied to labor market performance, making this week’s non-farm payroll data a key variable.

However, Kevin Flanagan, Head of Fixed Income Strategy at WisdomTree, pointed out that this report might be complicated by government shutdowns, which could weaken its reference value. He suggests focusing on the December non-farm payroll report to be released by the US Bureau of Labor Statistics on January 9, 2026, as its completeness may be more convincing.

How Non-Farm Data Moves the Three Major Assets

If non-farm payrolls outperform expectations, it will reinforce the Federal Reserve’s stance to keep interest rates high, strengthening the US dollar and putting pressure on US stocks and gold. Conversely, if the data underperform, markets will increase expectations for rate cuts, leading to a weaker dollar and benefiting gold and US stocks.

Morgan Stanley estimates that the US dollar will fall by 5% in the first half of next year, believing there is still ample room for the market to price in a deeper rate cut cycle. Citigroup holds an opposite view, emphasizing the resilience of the US economy and its potential to continue absorbing international capital, which supports the USD exchange rate. “The potential for a US dollar cycle recovery in 2026 remains strong,” according to Citigroup analysts.

Non-farm payroll data has become a key indicator for interpreting the Federal Reserve’s policy direction and predicting asset allocation trends, and market participants are holding their breath in anticipation.