U.S. Non-Farm Payrolls Data Sparks Market Reaction; Fed's December Rate Cut Decision Remains Uncertain

Non-Farm Payroll Data Will Become a Key Factor

The trends of the three major assets—US stocks, the US dollar, and gold—will face a “stress test” in the coming days. On November 20th at 21:30, the US will release the September Non-Farm Payroll report, which will directly influence market expectations for the Federal Reserve’s December policy.

The market generally expects that the US non-farm employment will increase by 50,000 in September, with the unemployment rate remaining at 4.3%, and the average hourly earnings year-over-year staying at 3.7%. Behind these seemingly stable expectations lie unusual market implications.

Chain Reaction of Non-Farm Payroll Data Surprises

If this non-farm data exceeds expectations, it will support a bullish outlook for the US dollar index, potentially allowing the dollar to continue rising. Conversely, gold and US stocks may face correction pressures. The logic is straightforward: strong employment data indicates a resilient US economy, reducing the necessity for the Federal Reserve to cut interest rates.

However, if the September non-farm data underperforms, the situation will reverse entirely. Weak employment figures will reinforce market bets on a Fed rate cut, which will weaken the dollar and benefit gold and US stocks’ upward movement.

Turbulent Outlook for the Federal Reserve’s December Decision

In reality, there are serious disagreements within the Federal Reserve regarding whether to cut rates in December. According to the latest publicly available minutes from the October meeting, most officials believe that, with inflation still high and the labor market showing signs of cooling, a hasty rate cut could actually exacerbate inflation risks.

The CME FedWatch Tool’s latest data shows the market’s current expectations: a 67.2% probability that the Fed will keep rates unchanged in December, and a 32.8% chance of a 25 bps rate cut. This indicates that market expectations for a rate cut are far from certain.

Diverging Institutional Views but Rate Cut Still Possible

However, Standard Chartered Bank and HSBC hold different views. Standard Chartered firmly believes that the Fed will cut rates in December, citing the possibility of significant softening in employment data from November to January, which could persuade the centrist faction within the Fed to support a rate cut.

HSBC also considers the possibility of a rate cut in December, but notes that by 2026, further rate cuts will be significantly limited.

US Stocks Technical Outlook May Have Bottomed

JPMorgan recently stated that the technical correction in US stocks may have come to an end, and now is an appropriate time to build positions. Andrew Tyler, head of global market intelligence at JPMorgan, said, “Since there are no substantial changes in fundamentals, and our investment logic does not rely entirely on loose Fed policy, buying on dips is a reasonable choice.”

JPMorgan further believes that Nvidia’s latest earnings report and the September non-farm payroll data could lay the foundation for new highs in US stocks.

Long-term US Dollar Trends and 2026 Outlook

HSBC offers another perspective: if the Fed’s room for further rate cuts in 2026 becomes limited, the dollar may hit a low in the first quarter of that year or earlier, then start a rebound cycle. This has important implications for the overall allocation of US assets.

Overall, the US non-farm payroll data will be the most critical market variable in the short term, directly influencing expectations for the Fed’s December policy and subsequently affecting the future directions of the dollar, gold, and US stocks.