Job openings data to test strength of US labor market ahead of NFP – Crypto News – Crypto News
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Will US JOLTS job openings data increase chances of more rate hikes ahead? Will US JOLTS job openings data increase chances of more rate hikes ahead?

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Job openings data to test strength of US labor market ahead of NFP – Crypto News

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  • 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).”

 

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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