The U.S. dollar index (DXY) bounced off the intraday low of 97.813 on Friday, after the U.S. Labor Department released the nonfarm payrolls report for November showing 211,000 jobs were added to the economy, while the U-3 headline unemployment rate held at 5.0%. Wall Street economists’ consensus expectations were only for a 200,000 jobs gain with the unemployment rate remaining at 5.0%. The August and September figures were revised by a combined 35,000 more than previously reported. 

The U-6 rate, that includes all the jobless plus people marginally attached to the workforce and those employed part-time because of a weak economy, inched up 0.1 percentage point to 9.9%. The labor force participation rate in November also bumped up 0.1 percentage point to 62.5% to a level near a 38-year low, meaning about 94.45 million Americans, 16 years and older, did not have a job and were not actively trying to find one. The labor force participation rate of 62.4% in September and October was the lowest in 38 years.

The dollar got further support on Friday afternoon after European Central Bank President (ECB) Mario Draghi delivered a less-hawkish speech at the Economic Club of New York, saying that "there is no particular limit to how we can deploy any of our tools.", meaning the ECB could step up their stimulus efforts if necessary.

Just a day earlier, the ECB announced at its Governing Council meeting in Frankfurt that they would cut the overnight deposit rate to minus 0.3% from minus 0.2%, and leave its key lending rate unchanged at 0.05%. The ECB also said it decided to extend purchases of government bonds and other assets from the September 2016 target date through at least March 2017. 

The markets had expected the ECB to drop the overnight rate to minus 0.4% and the key lending rate to zero from 0.05%, as well as to expand its 1.1 trillion euro bond-buying program by 360 billion euros.

Eurostat said on Tuesday that the eurozone's unemployment rate, similar to the U-6 rate in the United States, fell to a seasonally adjusted 10.7% in October from 10.8% a month earlier. This is the lowest rate recorded in the euro-area since January 2012. Analysts had expected the jobless rate to hold steady at 10.8%. According to the report, among the member states, the lowest unemployment rates were recorded in Germany at 4.5% and the highest in Greece and Spain with the unemployment rates at 24.6% and 21.6%, respectively.

Earlier in the week on Tuesday, the Institute for Supply Management (ISM) reported that its manufacturing index for the U.S. was 48.6 in November, its lowest level since June 2009, a decrease of 1.5 percentage points from the October reading of 50.1. A reading below 50 indicates contraction in the manufacturing sector. The index missed the expected 50.5 reading of economists surveyed by Reuters.

The weak ISM manufacturing index data came on the heels of a sharp drop in MNI's Chicago purchasing manager's index (PMI) on Monday, an indicator of business manufacturing and overall business activity in the Midwestern U.S., which plunged to 48.7 in November from 56.2 in October, missing Bloomberg economists’ estimate of 54. The strong dollar has reduced overseas demand for U.S. manufactured products. Some analysts, including Peter Boockvar, chief market analyst at The Lindsey Group, told CNBC that "We're in manufacturing recession.”

The Fed committee, including Federal Reserve Chair Janet Yellen, is now convinced that they are ready to raise rates at the next FOMC meeting in less than two weeks, despite the mixed bag of U.S. economic data of late, and an industrial sector that is already heading into a technical recession. In her speech delivered at the Economic Club in Washington on Wednesday, Yellen laid the ground for an interest rate liftoff as she put it, “Holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and thus undermine financial stability,”.

The federal funds futures, traded on the Chicago Mercantile Exchange and commonly used to estimate the market’s views on the likelihood of changes in U.S. monetary policy, dropped to 21.0% for a quarter-point rate hike at the Fed’s FOMC meeting on December 15-16 while the odds for a half-point rate hike jumped to 79.1%, according to data from the CME Group as of December 4. 

Technically, the DXY has broken down the bearish ascending (ASC) wedge chart pattern, with a projected target of 94.49. A Fed rate hike could already be priced in, as the Fed funds futures contracts show 79.1% odds for a half-point rate hike. The currency markets should now be focused on the weakening U.S. economy. 

For whatever reasons, U.S. consumers saved rather than spent, as consumer spending, which accounts for about two-thirds of the U.S. economy, increased by just 0.1% in October on a month-on-month basis, unchanged from September, missing the Reuters forecast for a 0.3% rise. Core inflation, excluding food and energy as measured by the personal consumption expenditures (PCE) price index, rose 1.3% year-on-year, remaining unchanged for 10 months and below the Federal Reserve’s target of 2% for the 42nd straight month. 

According to CNBC, holiday retail sales are off to a dreary start. Bank of America Merrill Lynch's Lorraine Hutchinson said in her note on Thursday that early holiday sales fell 1.2% year-on-year, the first decline since the recession in 2009.