U.S. Dollar Steadies Ahead of Key Jobs Data as Markets Weigh Fed Rate-Cut Timing

The U.S. dollar traded broadly steady on Tuesday as investors positioned ahead of a series of U.S. labor market and services-sector data releases that could influence expectations for the timing of the Federal Reserve’s next interest rate cut.Markets are focused on several data points due later today, including:December ADP private-sector employment (“small non-farm payrolls”), due at 21:15 Beijing timeNovember JOLTS job openings, due at 23:00 Beijing timeISM services PMI, also scheduled for releaseDespite the busy data calendar, the primary focus for markets this week remains Friday’s U.S. non-farm payrolls (NFP) report, which is widely seen as the most consequential input for near-term monetary policy expectations.Labor data in focus for Fed outlookInvestors are closely watching for signs of further cooling in the U.S. labor market, which could strengthen the case for earlier policy easing by the Federal Reserve.Weaker employment or hiring data could prompt markets to bring forward expectations for rate cuts.Resilient or stronger-than-expected data would likely reinforce the Fed’s cautious stance and delay easing expectations.Rate-cut probabilities remain finely balancedAccording to LSEG data, markets are currently pricing in:Roughly a 50/50 probability of a rate cut in MarchA fully priced-in rate cut not expected until JuneThis reflects ongoing uncertainty around the pace at which inflation is easing and whether labor market conditions are weakening enough to justify earlier action.Dollar holds range as traders await clarityWith expectations finely balanced and no clear catalyst yet, the dollar has remained range-bound, as traders await clearer confirmation from incoming data before making larger directional bets.Until Friday’s non-farm payrolls report provides additional clarity, currency markets are likely to remain data-dependent, with short-term moves driven by surprises in employment, hiring demand, and services activity.