Blog By David Stritch, Senior Multicurrency Analyst, Caxton — Monday 9 November 2026
The US dollar has opened slightly softer this Monday, giving back a little of Friday’s rally after October’s jobs report smashed expectations. Markets now treat a December rate hike from the Federal Reserve as the likely outcome, and with no progress in US-Iran talks, tomorrow’s US inflation figures could decide whether the dollar’s rate advantage widens further.
Key takeaways
Friday’s Non-Farm Payrolls report, the monthly count of jobs added outside farming, was far stronger than anyone predicted. Payrolls rose 165,000 in October, more than double the 62,000 expected and above all 79 forecasts in Bloomberg’s survey, while August and September were revised up a combined 84,000. The unemployment rate dipped to 4.1%, and average hourly wages rose 0.4% from September, the biggest month-over-month gain since January. october payrolls top every forecast as unemployment falls back to 4 1 +2
On the face of it, that is a snapshot of an economy firing on all cylinders, despite energy prices sitting at multi-year highs. It also throws cold water on the slowing-jobs-market narrative that had been building through the summer.
There are soft spots. A broader measure of unemployment, which includes people who have given up searching and those working part-time because they cannot find full-time work, rose to 7.9% from 7.6% in September. But markets trade the headline, and the headline was unambiguous. devdiscourse
It matters because it gives the Fed licence to keep raising rates, and higher rates tend to attract capital into the dollar. The Fed raised its target range to 3.75% to 4.00% in September 2026 and held it in October. On Friday, CME FedWatch put the probability of a quarter-point December hike at 76.8%, and by this morning futures implied an 81% chance of a Fed rate increase on December 9, up from 71% a week earlier. Fed Rate Hike Odds for December 2026: What to Watch +2
The currency reaction was swift. After the release the pound-to-dollar rate fell 0.7% to 1.3356, and the euro-to-dollar rate dropped 0.64% to 1.1147. This morning’s modest pullback looks like position-squaring after a big move rather than a change of heart: the dollar index eased 0.1% to 102.11 after rising about 0.7% on Friday. poundsterlingliverallies
The Gulf is the other half of the story. Secretary of State Marco Rubio played down the chances of a breakthrough in talks with Iran, saying Tehran’s demands to date are unacceptable and in some cases “outrageous and ridiculous.” A stalled peace process keeps the inflation risk alive, which in turn keeps the Fed on alert. Bloomberg
Yet oil is falling regardless. Brent crude futures traded at $96.84 per barrel, down 1.51%, while US West Texas Intermediate (WTI) fell to $90.10 this morning, as investors continued to reduce the geopolitical risk premium following signs of possible de-escalation. That tension, between stalled diplomacy and cheaper oil, is exactly what the market is trying to price this week. arbiterzarbiterz
Tuesday’s US CPI is the main event. The annual rate is forecast at 3.7%; a hotter reading would lift the December hike odds above the current 77%. A softer print would do the opposite and could take some of the shine off the dollar. riotimesonline
Before that, today brings a raft of Fed speeches that will be scrutinised for clues on December. Officials have already been leaning hawkish: New York Fed President John Williams said inflation was too high, while San Francisco Fed President Mary Daly said the Fed would likely need to raise rates further despite the tech stock selloff. rallies
On this side of the Atlantic, Bank of England Governor Andrew Bailey speaks today, days after the Bank raised the policy rate by 25 basis points to 4%. Last week he refused to sign up to a “two and done” outlook for rates, so any hint that the Bank of England could keep pace with the Fed would support sterling. tmgmfxstreet
Further out, the Fed’s minutes of the October meeting on 18 November and the November jobs report on 4 December could each move the odds. riotimesonline
When rate expectations swing this much on single data releases, the cost of a payment can change materially in a matter of hours.
Tools such as forward contracts, which fix an exchange rate today for a payment later, and rate alerts can help take the guesswork out of these windows.
My read is that the dollar’s softer start is a breather, not a reversal. The jobs data has shifted the burden of proof: it now falls on inflation to give the Fed a reason not to hike. With Gulf diplomacy going nowhere, the risk to price pressures still leans upward, even if falling oil offers some relief. The wildcard is the oil market itself. If crude keeps sliding, that eventually feeds into lower inflation and makes December less of a foregone conclusion. Tuesday will tell us a lot.
Why did the dollar rise after the jobs report?
Strong hiring and lower unemployment suggest the US economy can absorb higher interest rates. That raised the odds of a December Fed hike, which tends to attract investment into the dollar.
Will the Fed raise interest rates in December?
Markets are pricing roughly a 77–81% chance of a quarter-point hike on 9 December, but the Fed has not committed. Tuesday’s inflation data and further Fed commentary could shift those odds.
How does US inflation data affect exchange rates?
A higher-than-expected CPI reading usually strengthens the dollar because it raises the chance of higher US rates. A weaker reading tends to have the opposite effect.
Why are oil prices falling if Iran talks have stalled?
Traders are trimming the risk premium built into prices after signs of possible de-escalation, even though a formal breakthrough hasn’t materialised. That premium could return quickly if tensions flare again.
What does the Bank of England’s stance mean for the pound?
The Bank raised rates to 4% last week and Governor Bailey has resisted signalling an end to hikes. If the Bank looks ready to keep tightening alongside the Fed, that could support sterling.
With US inflation data landing tomorrow and the December Fed meeting now firmly in view, this is a good moment to review any upcoming currency payments. Speak to Caxton’s multicurrency dealers about how forward contracts and rate alerts could help you manage currency risk through a volatile few weeks.
This article is for information only and does not constitute financial advice. Exchange rates can move quickly and past performance is not a guide to future performance.