- The US JOLTS data will be watched closely ahead of the release of the July Nonfarm Payrolls report on Friday.
- Job Openings are forecast to edge lower to 7.55 million in June.
- The state of the labor market is a key factor for Fed officials when setting interest rates.
The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday by the United States (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 into the supply-demand dynamics in the labor market, a key factor impacting salaries and inflation. Job Openings have been declining steadily since reaching 12 million in March 2022, indicating a steady cooldown in labor market conditions. In January of this year, the number of Job Openings came in above 7.7 million before declining to 7.2 million by March. Since then, JOLTS Job Openings rose for two consecutive months, reaching 7.76 million in May.
What to expect in the next JOLTS report?
Markets expect Job Openings for June to decline to 7.55 million. Although concerns over an economic downturn eased after the United States (US) reached trade agreements with Japan and the European Union (EU), there is still uncertainty surrounding the inflation outlook. Hence, Federal Reserve (Fed) policymakers could refrain from easing monetary policy unless labor market conditions worsen in a noticeable way.
The CME FedWatch Tool shows that markets virtually see no chance of a rate cut at the upcoming July 29-30 Fed policy meeting. Nevertheless, a significant negative surprise in the JOLTS Job Openings data, with a reading below 7 million, could feed into expectations for a 25-basis-point rate cut in September, which currently has a probability of about 60%. In this scenario, the US Dollar (USD) could come under pressure with the immediate reaction.
On the other hand, a reading near the market consensus, or better, could help the USD to hold its ground. Regardless, investors could opt to stay on the sidelines ahead of the Fed policy announcements on Wednesday, not allowing the data to have a long-lasting impact on the USD’s valuation.
Economic Indicator
JOLTS Job Openings
JOLTS Job Openings is a survey done by the US Bureau of Labor Statistics to help measure job vacancies. It collects data from employers including retailers, manufacturers and different offices each month.
When will the JOLTS report be released and how could it affect EUR/USD?
Job Openings will be published on Tuesday at 14:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD:
“The near-term technical outlook points to a buildup of bearish momentum in EUR/USD. The Relative Strength Index (RSI) indicator on the daily chart declined below 50 and the pair broke below the 20-day Simple Moving Average (SMA), currently located at 1.1700.”
“On the downside, the 50-day SMA aligns as the immediate support level at 1.1560 before 1.1450 (Fibonacci 23.6% retracement of the February-July uptrend) and 1.1335 (100-day SMA). Looking north, resistance levels could be spotted at 1.1700 (20-day SMA), 1.780 (static level) and 1.1830 (end-point of the uptrend).”
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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