US Dollar rises as robust labor data buoy sentiment

• The Federal Reserve's hawkish monetary stance contributes to rising Treasury yields, reinforcing the US Dollar's current strength.
• Rumors of a potential national economic emergency declaration bolster safe-haven demand and support the Greenback's appeal.
• Encouraging labor market figures, including lower jobless claims and steady employment gains, further amplify bullish sentiment.

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, gained towards 109.00 on Wednesday, mainly due to strong labor market figures. The Federal Reserve's (Fed) hawkish shift still supports elevated United States (US) bond yields, favoring the USD bulls. Meanwhile, geopolitical risks and trade war concerns help maintain safe-haven flows, capping any Greenback's pullback.

Daily digest market movers: US Dollar sees gains as markets assess fresh labor data

• US upcoming President Donald Trump may declare a national economic emergency to enact large-scale tariffs, spurring safe-haven bids for the US Dollar.
• Long-term US bond yields continue climbing on heavy supply; the 10-year hovers near 4.70%, while the 30-year approaches 4.93%.
• December's Federal Open Market Committee (FOMC) minutes loom large after the Federal Reserve's latest 25 basis point cut and pivot to a more hawkish stance, with some officials pushing for steady rates.
• Labor data shine: Weekly initial jobless claims fell to 201,000, beating the 218,000 consensus. Private sector employment rose by 122,000 in December, though below market expectations.
• Automatic Data Processing (ADP) notes a slowdown in hiring and pay gains, but health care leads job creation in the second half of 2024.
• Reports of strong US economic outperformance continue, delaying the market's Fed cut expectations.

DXY technical outlook: Indicators maintain momentum above key support

The US Dollar Index defended its 20-day Simple Moving Average, confirming underlying bullish momentum. Technical indicators show continued upward traction, yet they are not near overbought territory, suggesting room for additional gains. Any dips may be shallow, with buyers emerging on safe-haven flows and robust yield appeal. Unless a significant shift in sentiment occurs, the DXY looks poised to sustain its constructive bias in the sessions ahead.