Markets Braced for Uncertainty as Dollar Strength Reflects Mixed Economic Signals

Trading activity during early Asian hours on Friday revealed a complex landscape as market participants anticipated multiple catalysts that could reshape near-term monetary and trade policy. The U.S. dollar index, tracking performance against six major currencies, advanced 0.2% to reach 98.883, extending its winning streak to a third consecutive session.

Supreme Court Tariff Decision Looms Over Market Sentiment

Beyond the upcoming payrolls data release, traders faced a critical juncture with the Supreme Court expected to rule on President Trump’s ability to unilaterally impose tariffs under the International Emergency Economic Powers Act (IEEPA). An unfavorable court decision carries potential for significant market disruption, with businesses and stakeholders preparing for negotiations involving roughly $150 billion in duty refund disputes. This judicial uncertainty has created additional caution among market participants who can only anticipate how such a ruling might ripple across trade dynamics.

Employment Data May Offer Limited Clarity on Fed Path

As the non-farm payrolls report for December approached release, market expectations were notably tempered. ING analysts cautioned that weakness in job creation might not substantially influence the Federal Reserve’s interest rate trajectory, particularly given the statistical distortions introduced by the government shutdown. The unemployment rate could prove more consequential than headline payroll numbers in signaling labor market health.

Fed funds futures pricing, according to CME Group’s FedWatch metrics, reflected an 89% probability of interest rate maintenance at the January 27-28 meeting—a substantial shift from the 68% probability recorded a month prior. Recent jobless claims data showed minor upticks, suggesting potential labor market softening.

Currency Markets Navigate Divergent Central Bank Signals

Dollar-Yen dynamics: USD/JPY pair held steady near 156.885 as Japanese household consumption data surprised to the upside in November, hinting at robust consumer activity before the Bank of Japan’s December rate hike to three-decade highs. BOJ Governor Kazuo Ueda signaled openness to further tightening depending on economic conditions and inflation trajectories.

Dollar-Yuan positioning: Against the offshore Chinese yuan, the dollar remained anchored at 6.982 with markets anticipating December inflation readings from China.

Broader currency action: The euro showed no change at $1.1657 pending German trade and eurozone retail figures. Sterling dipped marginally by 0.1% to $1.3436, while the Australian dollar held at $0.6698 and the New Zealand dollar eased 0.1% lower to $0.5749.

Cryptocurrency Sentiment Turns Cautious

Digital assets displayed modest weakness as traders reassessed risk positioning. Bitcoin traded at $96.65K, posting a +1.57% gain over the past day, while Ethereum moved to $3.35K with a +1.55% advance—both reflecting the same underlying caution visible across broader markets as investors navigate multiple policy uncertainties ahead.