US FX WRAP: Dollar firmer following mixed NFP report; Yen weighed by potential Japanese Lower House election

Analysis details (20:30)

The dollar was ultimately firmer after the December jobs report, which sent mixed signals about the labour market. Downside was originally seen likely a result of the headline miss (act. 50k vs exp. 60k), but was accompanied by a welcome drop in the unemployment rate to 4.4% after the prior 4.6% was revised down to 4.5%. DXY saw a reversal, hitting highs of 99.264 amid broad USD strength. Strength extended after the Supreme Court said it will not rule today on the US Trump tariff case; however, those gains faded perhaps as uncertainty is to continue over US trade policy. On the consumer, sentiment improved to its highest level since Sept 2025, with improvement present amongst low-income consumers.

JPY was the notable G10 laggard, weighed by reports of political instability, namely Japan's PM Takaichi considering dissolving the Lower House; Lower House election likely in early or mid February. Japanese equities took the news as positive, likely on the prospects of greater stimulus inbound if Takaichi can take more control of the lower house following an improvement in the polls. Overnight, we got Bloomberg reports that BoJ officials are set to keep rates on hold in January and said to weigh a downgrade of CPI outlook on government measures. USD/JPY trades near highs of 158.187.

CAD price action seemingly followed the dollar today despite a slowdown in Canadian jobs growth. Employment grew 8.2k (exp. -5k, prev. 53.6k), as full-time employment gains (+50.2k) offset a decline in part-time employment (-42.0k). The unemployment rate rose to 6.8% from 6.5% (exp. 6.6%%), accompanied by an uptick in the participation rate. 

09 Jan 2026 - 20:30- ForexData- Source: Newsquawk