Five fundamentals for the week: Nonfarm Payrolls to keep traders on edge in first full week of 2025

• Investors are fully back to their desks, facing a full buildup to America's Nonfarm Payrolls.
• Minutes from the latest Fed decision stand out in the middle of the week.
• Chinese inflation figures are eyed as concerns of a Sino-American trade war loom.

Did the US economy enjoy a strong finish to 2024? That is the question in the first full week of trading in 2025. The all-important Nonfarm Payrolls (NFP) stand out, but a look at the Federal Reserve (Fed) and the Chinese economy is also of interest. 

1) ISM Services PMI to provide a broad look at the world's largest economy

Tuesday, 15:00 GMT. The forward-looking Purchasing Managers Index (PMI) for the large services sector – some two-thirds of the US economy – always rocks markets. It serves as a broad economic gauge, and its employment component provides a hint toward Friday's jobs report.

After the parallel ISM Manufacturing PMI exceeded estimates, hopes are high for the ISM Services PMI. Back in November, the headline came out at 52.1, above the 50-point threshold separating expansion from contraction. The US economy is doing well, as American consumers remained upbeat. 
 

ISM Services PMI. Source: FXStreet.

Another improvement is on the cards for December, according to the economic calendar. Robust data would boost expectations for the Nonfarm Payrolls, and also support the US Dollar (USD) and Stocks, which want to see fast expansion. Gold would struggle. Any disappointment in the data would do the opposite.  

2) ADP jobs figures shape NFP expectations

Wednesday, 13:15 GMT. Automatic Data Processing (ADP) is America's largest payrolls provider, handling roughly one in six payslips. That gives its private-sector jobs report some heft in markets – despite a not-so-great correlation with the official Nonfarm Payrolls.

ADP reported that 146K jobs were gained in November, which was in line with estimates. A similar outcome is on the cards now, and it would keep markets happy. Any outcome above 200K would be bullish for Stocks and the US Dollar, while a sub-100K result would buoy Gold.

It is essential to note that the reactions to ADP's figures tend to be short-lived – prices revert to pre-release levels relatively quickly. However, the new data shapes Nonfarm Payrolls expectations, with investors adjusting their prospects.
 

3) FOMC Meeting Minutes may provide some solace to markets after the hawkish decision

Wednesday, 19:00 GMT. The Federal Open Markets Committee (FOMC) Meeting Minutes tend to outhawk the sentiment of the corresponding Fed decision. But, can the minutes from the December 2024 meeting be any more hawkish?

Just before Christmas, Fed Chair Jerome Powell stunned markets with an upgrade to the projected interest rates in 2025, 2026 and 2027, and seemed confident about the US economy. Moreover, Powell also said that some members included potential policies from the upcoming Trump administration in their forecasts – expecting higher inflation due to tariffs. 

Will hawks at the FOMC show their strength once again? Investors know what happened last time, so expectations are high. That leaves room for a dovish surprise. Perhaps those who do not share such a hawkish stance could come out of the woodwork and balance the stance.

It is essential to note that policymakers consider market reactions and revise the minutes until the last moment. 

4) Chinese inflation data may point to ongoing weakness

Thursday, 1:30 GMT. While the Fed is worried about inflation raising its ugly head, policymakers in Beijing are struggling with the opposite issue – deflation. Producer prices fell 2.5% YoY in November, and consumer prices rose by a meager 0.2%.

While deflation is good for individuals, it reflects economic malaise. China is the world's second-largest economy, and it is struggling to boost growth, especially when it comes to internal consumption.

Another downbeat figure would weigh on Stocks while boosting Gold and the US Dollar. China can export its deflation – and economic weakness – to the rest of the world. A bump up would provide hope.

5) Nonfarm Payrolls may defy caution with another big gain

Friday, 13:30 GMT. The "king of forex indicators" is back after a long wait – published on the second Friday of the month this time. America reported an increase of 227K jobs in November, smashing expectations and reflecting a strong economy. That report also showed that the poor increase of 36K (revised up from 12K) in October was skewed by hurricanes and strikes, as suspected.

US Nonfarm Payrolls. Source: FXStreet.

Economists remain cautious ahead of the December report, expecting a moderate 160K jobs created in December. That would be a "Goldilocks" outcome – not too hot to cause worries about higher rates, nor too cold to trigger concerns about a recession. 

I expect Nonfarm Payrolls to beat expectations once again, topping 200K and showing the resilience of the world's largest economy. If I am correct, the US Dollar and Stocks would rise, while Gold would retreat. A downbeat sub-100K outcome would push the precious metal up while hitting equities and the Greenback. 

Reactions to Nonfarm Payrolls are messy, with markets occasionally jumping to one direction only to fully reverse soon afterward. Such whipsaws are common, especially if the outcome is relatively close to expectations. 

Another factor causing a whipsaw is the expectation from the Fed to keep rates unchanged in its first decision of 2025. Only a massive surprise in either direction would change the calculation. That means that in case of a knee-jerk reaction to one direction, investors will soon conclude that the Fed will likely hold its ground. 

Final thoughts

The first full week after the holiday season will likely see new energy in markets, which means bigger moves than beforehand. Trade with care.