The Nonfarm Payroll and Purchasing Managers' Index data series failed to provide clear clues on the Fed's future interest rate outlook, leaving the US dollar volatile.

The US Dollar surged after the release of the Nonfarm Payroll (NFP) data in the New York session on Friday (5/January). The US Dollar Index (DXY) even jumped around 100 pips to touch a record high since mid-December at 103.10. However, the Dixie immediately fell back to the 101.90s at the time of writing.

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A package of US employment data released today compactly surpassed consensus estimates. The unemployment rate stagnated at 3.7% in December 2023, despite the previous consensus estimating an increase to 3.8%.

The number of NFP increased by 216k in the period, much better than the consensus estimate of 170k. Average Hourly Earnings growth increased from 4.0% to 4.1% on an annualized basis, also better than the estimate of 3.9%.

The good employment data had raised hopes that the Fed's interest rates would remain high for longer. Unfortunately, those hopes were dashed following the release of the extremely disappointing Non-Manufacturing PMI data.

ISM reported that the Purchasing Managers' Index (PMI) score for the US non-manufacturing sector fell sharply from 52.7 to 50.6 in December 2023. The previous consensus anticipated only a slight deterioration to 52.6.

The Employment subindex in the Nonmanufacturing PMI report collapsed from 50.7 to 43.3 - a reading below 50.0 signals contraction.

Anthony Nieves, Chairman of the ISM Business Services Survey Committee, said, "Respondents' comments varied by company and industry. Concerns over inflation, interest rates, and geopolitical events, continue to persist. Rising labor costs and labor constraints remain employment-related challenges."

The overall series of NFP and PMI data failed to provide clear clues on the Fed's interest rate outlook going forward. Market participants will continue to wait for the release of the next US economic data, as well as statements from Fed officials, to guess when the Fed will start cutting interest rates.