The dollar rose despite news from the US

Despite weak US labor market data from ADP, the dollar rose on Wednesday.

The dollar index reached a new peak of over 104.2, the highest it has been in more than two weeks.

For almost six days now, DXY has been on an upward trend.

In contrast, December is the least favorable month for the dollar.

The FxPro analyst team noted that ADP reported 103 thousand new private sector jobs in the US, which was lower than the expected 130 thousand. This slowdown in the labor market is being caused by the pressure of interest rates and the fact that the potential for a rapid recovery from the pandemic is diminishing.

The indicator is near its lowest point in almost two years.

On Tuesday, figures revealed that job openings in the United States had dropped to their lowest point in two and a half years in October, providing the clearest indication yet that high interest rates are having a negative effect on the demand for labor.

The US labor market cooling will help to reduce inflation in the nation, thus allowing the Federal Reserve to start decreasing interest rates. This, in turn, will put pressure on the US dollar.

Reuters reports that investors have been overly optimistic about the size of rate cuts in the coming year, leading to a strengthening of the dollar.

BNY Mellon Investment Management notes that markets may have been too aggressive in predicting rate cuts over the next year. The Fed may delay their decision until the second quarter, and even then the cuts will be much less than what the market is expecting.

For the past six years, December has been the weakest month for the dollar, according to Bloomberg. Looking at the past five, ten, and twenty years, the DXY index has dropped an average of 1.56%, 0.82%, and 0.74%, respectively, during this month.

Friday will bring the release of official US employment data, which will give more insight into the labor market prior to the Federal Reserve's gathering next week. It is anticipated that the number of jobs outside of agriculture will increase by 180 thousand, following a 150 thousand increase the month before.

ANZ predicts that the Federal Reserve will reduce its projected targets, yet will remain firm in its stance next week.