JOLTS Preview: Job openings expected to decrease in June ahead of Nonfarm Payrolls
|- The US JOLTS data will be watched closely by investors ahead of the July jobs report.
- Job openings are forecast to edge lower to 8.03 million on the last business day of June.
- Markets fully price in a 25 basis points Fed rate cut in September.
The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday by the US Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in June, alongside the number of layoffs and quits.
JOLTS data is scrutinized by market participants and Federal Reserve (Fed) policymakers because it can provide valuable insights regarding the supply-demand dynamics in the labor market, a key factor impacting salaries and inflation. Job openings have been declining steadily since coming in above 12 million in March 2022, pointing to cooling conditions in the labor market. In May, the number of job openings rose to 8.14 million from the multi-year low set at 7.92 million in April.
What to expect in the next JOLTS report?
"Over the month, both the number of hires and total separations were little changed at 5.8 million and 5.4 million, respectively," the BLS noted in its May JOLTS report. "Within separations, quits (3.5 million) and layoffs and discharges (1.7 million) changed little," the BLS added.
Following the 9.3 million openings announced in September, job openings remained below 9 million for eight consecutive months. Investors expect job openings to edge slightly lower to 8.03 million in June from 8.14 million in May. Meanwhile, Nonfarm Payrolls rose by 206,000 in June following the 218,000 (revised from 272,000) increase recorded in May.
The US Dollar (USD) Index, which measures the USD’s valuation against a basket of six major currencies, is down more than 1% in July, with investors expecting a Fed rate cut in September. Soft inflation data in the second quarter and growing signs of a cooldown in labor market conditions fed into expectations for the Fed to start an easing cycle in September. According to the CME FedWatch Tool, investors see a nearly 70% probability that the Fed will reduce the policy rate by a total of 75 bps in 2024.
When will the JOLTS report be released and how could it affect EUR/USD?
Job openings numbers will be published on Tuesday, July 30, at 14:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his view on the potential impact of JOLTS data on EUR/USD:
“Unless there is a significant divergence between the market expectation and the actual print, the market reaction to JOLTS data is likely to remain subdued, with investors refraining from taking large positions ahead of the Fed policy announcements on Wednesday and July jobs report on Friday.”
“Nevertheless, a reading above 8.5 million could help the USD find demand with the immediate reaction, while a print at or below 7.5 million could have the opposite impact on the USD’s valuation. The 100-day and the 200-day Simple Moving Averages (SMA) form key support level near 1.0800 for EUR/USD. If the pair falls below that level and starts using it as resistance, technical sellers could take action. In this scenario, additional losses toward 1.0700 (psychological level, static level) could be seen. On the upside, 1.0900 (psychological level, static level) and 1.0950 (July 17 high) align as technical resistance levels.”
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.