The US dollar maintained a solid year-to-date performance, despite a modest softening on Friday following a mixed December labor report. While non-farm payrolls grew by only 50,000—missing the 66,000 consensus—the unexpected drop in the unemployment rate to 4.4% and steady wage growth suggested that the U.S. labor market remains firm enough to prevent a dovish pivot in Federal Reserve expectations.
This data served more as a positioning adjustment for the greenback than a change in trend, as the 10-year Treasury yield struggled to break above the critical 4.2% resistance zone.
Beyond the U.S., the Canadian Dollar ended the week as the weakest performer among the majors; although headline employment growth beat expectations, a sharp jump in the unemployment rate to 6.8% highlighted a growing mismatch between labor supply and hiring. In Europe, the Euro and Swiss Franc remained under pressure, with Eurozone retail sales showing only a marginal improvement that did little to shift the narrative of sluggish regional growth. Meanwhile, the Australian Dollar and Sterling managed to hold their ground as the primary challengers to the US dollar's dominance.
Geopolitical tensions in South America and a tech-led rally in equities, fueled by major announcements at the CES event, provided a supportive push for risk-sensitive assets. Still, the primary driver for the forex market remained the recalibration of interest rate paths.
China’s inflation data also offered a selective upside surprise, yet the full-year flat CPI reading kept the deflationary risk over the broader Asia-Pacific region.
Pairs In Focus
1.AUD CAD
In 2026, this pair broke through a multi-month consolidation that started in late September. Last Friday’s pullback to the previous resistance point at 0.92580 has been rejected.
AUD/CAD daily chart, Source: TradingView
As long as that support holds, a more likely move is the expansion upwards with strong resistance at 0.95450.
2.GBP SGD
The pound started the year with a failed attempt to break the important 1.73800 level against the Singapore Dollar. Since then, the momentum has been weakening, characterized by a sharp drop by the end of last week.
GBP/SGD Daily chart, Source: TradingView
As long as Friday’s high stays intact, the likely move is to the downside, particularly testing the 1.71100 support.
The Week Ahead
Looking ahead, the focus shifts from labor market dynamics to inflation, with the release of the December Consumer Price Index and the Producer Price Index. These reports will provide further information on whether the US dollar can reclaim its momentum.
Furthermore, earnings season is scheduled to start, traditionally led by the major US banks such as JPMorgan and Bank of America, which provide risk sentiment.
Traders will closely monitor a slate of Federal Reserve speakers and the publication of the Beige Book for any hints regarding the central bank's appetite for a rate cut later this month.
Note: Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. Singapore Forex Club is not responsible for any financial decisions based on this article's contents. Readers may use this data for information and educational purposes only.
