The US Bureau of Labor Statistics (BLS) will release the December Nonfarm Payrolls (NFP) data on Friday at 13:30 GMT.

The US Dollar (USD) is likely to experience high volatility as this employment report could provide important clues about how the Federal Reserve (The Fed) will set its policy in the coming year.

What to Expect from the Upcoming Nonfarm Payrolls Report?

Economists expect Nonfarm Payrolls to increase by 60,000 in December, following a rise of 64,000 in November. During this period, the unemployment rate is expected to drop to 4.5% from the previous 4.6%, while annual wage inflation, measured by the change in average hourly earnings, is projected to rise to 3.6% from the previous 3.5%.

The monthly report published by Automatic Data Processing (ADP) showed that private payroll increased by 41,000 in December, after a decline of 29,000 in November.

In addition, the Institute for Supply Management’s Services Purchasing Managers’ Index (PMI) Employment Index rose to 52 after six consecutive months below 50, indicating a return to expansion territory.

To forecast this employment report, TD Securities analysts stated:

"We expect job growth to remain around 50,000 in the last two months, with private payroll increasing by 50,000 in December, likely due to the government cutting 10,000 jobs during the same period. We also anticipate the unemployment rate will return to normal at 4.5% after previously rising to 4.6% due to the temporary government shutdown in November. Average hourly earnings are likely to rise 0.3% month-on-month and 3.6% year-on-year," they added.

How Will the December US Nonfarm Payrolls Data Impact EUR/USD?

The US dollar closed the year on a bullish note and remained strong at the start of 2026. Although the Fed adopted a dovish stance at the December policy meeting, market participants still see a strong likelihood that the US central bank will hold interest rates unchanged at the January meeting.

According to the CME FedWatch Tool, investors currently expect the probability of a 25 basis point rate cut this month to be less than 15%. Nevertheless, employment data could still influence the chances of a rate cut in March, which is currently around 45%, and trigger a significant market reaction.

At the start of this week, Federal Reserve Bank of Richmond President Thomas Barkin emphasized that interest rate decisions must be "very cautious," given risks to unemployment and inflation goals. Barkin noted that the unemployment rate remains low, but they do not want the labor market to deteriorate further.

Meanwhile, Minneapolis Fed President Neel Kashkari explained that the labor market is clearly slowing down, and added that there is a risk the unemployment rate could "jump from here." Rabobank analysts noted that the market will likely adjust expectations regarding the timing of the next Fed rate cut.

"Currently, consensus expects the stable interest rate policy to remain in place this month. Indeed, given the split within the FOMC, market prices suggest the risk of a stable policy could persist into the spring. A weak payroll report this week would weaken the USD. However, we expect the USD to once again demonstrate safe-haven behavior this year, so it is likely to continue receiving support. Overall, trading volatility is expected to remain high as markets digest various events this year," they explained.

A major surprise in NFP, with results above 80,000 accompanied by a drop in the unemployment rate, might push investors toward expecting the Fed to hold rates steady in March, causing the USD to strengthen immediately. In such a scenario, EUR/USD could face bearish pressure heading into the weekend.

On the other hand, a disappointing NFP result—30,000 or lower—could trigger USD selling and open the door for EUR/USD to reverse higher. Eren Sengezer, European Session Lead Analyst at FXStreet, provided a brief technical outlook for EUR/USD:

"The Relative Strength Index (RSI) on the daily chart has fallen below 50 for the first time since late November, and EUR/USD closed below the 20-day Simple Moving Average (SMA) for four consecutive days, signaling increasing bearish pressure. If the pair breaks below the 100-day Simple Moving Average (currently at 1.1665) and confirms this level as resistance, technical sellers are likely to remain active. In this scenario, 1.1600 (round number) could serve as a temporary support before 1.1560 (200-day SMA)."

"On the upside, 1.1740 (20-day SMA) acts as a dynamic resistance. If EUR/USD manages to stabilize above this level, the pair could gain recovery momentum and target 1.1800 (static level, round number), followed by 1.1870 (static level)."