- 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.”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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