- The US JOLTS data will be watched closely by investors ahead of the March jobs report.
- Job openings are forecast to edge lower to 8.79 million on the last business day of February.
- Markets see a strong probability of a 25 bps Fed rate cut in June.
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 February, 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. While job openings have been trending down over the last year and a half – a sign of cooling demand for labor – they remain above pre-pandemic levels.
What to expect in the next JOLTS report?
“Over the month, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively,” the BLS noted in its January JOLTS report and added: “Within separations, quits (3.4 million) and layoffs and discharges (1.6 million) changed little.”
After declining steadily from 10.5 million to 8.85 million in the January-October period, job openings seem to have stabilized below 9 million since. For the upcoming February data, markets expect another slight downtick to 8.79 million from 8.86 million in January. In 2019, before the hit of the Covid-19 pandemic, openings were at an average of around 7 million. Meanwhile, Nonfarm Payrolls rose by 275,000 in February following January’s 229,000 increase (revised from 353,000).
The US Dollar (USD) ended March on a bullish note. The USD Index (DXY), which measures the USD’s valuation against a basket of six major currencies, turned north in the second half of the month and closed in positive territory. Although the Federal Reserve’s (Fed) revised Summary of Projections (SEP) showed that policymakers still expect the US central bank to lower the policy rate by a total of 75 basis points (bps) in 2024, upbeat macroeconomic data releases from the US helped the USD hold its ground. According to the CME FedWatch Tool, markets are currently pricing in a 65% probability of a 25 bps rate cut in June.
FXStreet Analyst Eren Sengezer shares his view on the JOLTS Job Openings data and the potential market reaction:
“In case the JOLTS Job Openings data for February comes in at or below 8.5 million, it could reaffirm loosening conditions in labor market and weigh on the USD with the immediate reaction. On the other hand, a reading close to 9.5 million could cause investors to refrain from pricing in a June rate cut, at least until Friday’s March jobs report, and allow the USD to stay resilient against its peers.”
When will the JOLTS report be released and how could it affect EUR/USD?
Job openings numbers will be published at 14:00 GMT. Eren points out key technical levels to watch for EUR/USD ahead of JOLTS data:
“The 200-day Simple Moving Average and the Fibonacci 38.2% retracement of the latest downtrend form strong resistance at 1.0840-1.0850 for EUR/USD. In case the pair manages to clear that hurdle, it could attract technical buyers and target 1.0900 (Fibonacci 50% retracement) and 1.0950 (Fibonacci 61.8% retracement).”
“On the downside, sellers are likely to retain control while EUR/USD stays below 1.0800 (Fibonacci 23.6% retracement). The 1.0700 level (end-point of the downtrend) could be seen as next support before 1.0650 (static level from November).”
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.
