The latest US employment data came as a shock to market participants. Price action during and after the announcement shows that investors are unsure how to price in the new figures. This is why most assets saw a strong impulse wave, succeeded by a full correction. The only asset which saw a clear direction was the US Dollar.

Strong Economic Data Boosts US Sentiment

Analysts were previously expecting January’s employment data to be similar to the previous months. Over the past six months, the US economy, on average, has added 40,000 employed individuals on a monthly basis.

Conversely, the employment data read significantly stronger than in previous months and the current projections. The Non-Farm Payroll Change read +130,000, double previous expectations. The NFP Change is the highest reading since July 2025. The Average Hourly Earnings also rose 0.4%, higher than the previous month, where earnings only rose 0.1%. Lastly, the US Employment Rate fell from 4.4% to 4.3%.

As a result, the US employment sector remains resilient and even shows some signs of expansion. This, in turn, supports the view of the majority of market participants that the US Federal Reserve will continue the pause in the “dovish” cycle and adjust the cost of borrowing by -25 basis points only once in 2026. Thus, the probability of the indicator remaining in the 3.50% to 3.75% range at the March 18th meeting is now 94%, according to the Chicago Mercantile Exchange (CME) FedWatch Tool. Previously, the possibility of a pause was 79%.

According to the former senior adviser at the Federal Reserve Bank of San Francisco, Tim Mahedy told journalists, “It absolutely complicates the argument for lower rates”. “The January data were really strong”.

The US Dollar

The US Dollar was one of the only assets which saw momentum remain in favour of the original impulse wave. During the Asian session and the first half of the European session, the US Dollar Index was weakening. After the positive NFP results, the currency rose 0.55%. After the original spike, the currency had seen retracements and volatility. However, the index 0.12% higher than the open price and 0.45% higher than the day’s low.

On Thursday, the price of the index continues to trade higher. The US Dollar is the best-performing currency of the day alongside the New Zealand Dollar. The currency is likely to continue obtaining potential support from the employment data. However, this afternoon’s Weekly Unemployment Claims will renew volatility levels. If the weekly claims are lower than expectations, the Dollar potentially may rise again.

S&P 500

The stock market at first saw a surge in buyers after the announcement of stronger employment data. This spike is most likely due to the sentiment increasing towards the US economy and its continuing economic expansion despite tariffs and new policies. However, the price was quick to correct downward and ended the day lower by 0.06%.

The stock market continues to struggle to break through the resistance level which has formed over the past week. For example, at $6,988 for the S&P 500 and $25,367 for the NASDAQ. A key factor which traders may be waiting for in order to obtain confirmation before trading is tomorrow’s CPI release. Analysts are expecting the US inflation rate to decline from 2.7% to 2.5%.

If inflation does not decline, sentiment towards the stock market may fall as the Fed will likely take a hawkish stance past March. However, as the price of the S&P 500 moves sideways, the price continues to remain above most moving averages on the 2-hour chart. Though the price is close to obtaining a bearish signal from the MACD index. The next trend will primarily depend on tomorrow’s Consumer Price Index.

Key Takeaways:

• US jobs data strongly beat expectations, with NFP at +130K, higher wages, and lower unemployment, signalling a resilient labour market.
• Fed rate cut expectations declined, with markets now pricing a 94% probability of a pause in March and only one 25bps cut in 2026.
• The US Dollar strengthened clearly, gaining momentum after the data and outperforming most major currencies.
• Stocks struggled despite strong data, with the S&P 500 facing resistance as investors await tomorrow’s CPI release for direction.