- The US Jolts data will be observed closely before the publication of the January Employment Report on Friday.
- Employment offers are expected to reach 8 million in December.
- The state of the labor market is a key factor for Fed officials in establishing policy.
The Employment and Labor Rotation Survey (Jolts) will be published on Tuesday by the United States Labor Statistics Office (USA). The publication will provide data on the change in the number of job offers in December, together with the number of layoffs and renunciations.
Jolts data are thoroughly analyzed by market participants and those responsible for the Federal Reserve Monetary Policy (FED) because they can provide valuable information about the dynamics of supply and demand in the labor market, a key factor that impacts wages and Inflation. Employment offers have been constantly decreasing since they exceeded 12 million in March 2022, indicating a constant slowdown in labor market conditions. In September, the number of jobs decreased to 7.44 million, marking the lowest reading since January 2021, before rising to 7.8 million and 8.09 million in October and November, respectively.
What to expect in the next Jolts report?
Markets expect job offers to be around 8 million on the last business day of December. After the January monetary policy meeting, the Federal Reserve (FED) pointed out that economic activity has been expanding at a solid pace, with the unemployment rate stabilizing at low levels and the conditions of the labor market maintaining robust. At the press conference after the meeting, the president of the FED, Jerome Powell, said the labor market seemed to be in general balance.
It is important to note that, although Jolts data refer to the end of December, the official employment report, which will be published on Friday, measures the January data.
In December, non -agricultural payroll (NFP) increased by 256,000, widely exceeding the market expectation of an increase of 160,000. Commenting on the employment situation in the US, the president of the Chicago Fed, Austen Goolsbee, said: “We will have to process whether retail profits were a strong Christmas season or something more general.” He added that he does not see the labor market as a source of inflation.
The CME Fedwatch tool currently shows that markets are valuing a probability of less than 15% of a 25 basic points (BPS) rates in March. Although it is unlikely that employment offers data influence Fed’s fees, a significant negative surprise, with a reading at or below 7 million, could weigh on the US dollar (USD) with the immediate reaction . On the other hand, market positioning suggests that the USD does not have much upward margin even if the data is better than expected.
“During the month, the hiring and the total separations changed little, standing at 5.3 million and 5.1 million, respectively,” said the BLS in its November Jolts report. “Within the separations, the resignations (3.1 million) decreased, but the dismissals and cessations (1.8 million) changed little.”
When will the Jolts report be published and how could it affect the EUR/USD?
Employment offers will be published on Tuesday at 3:00 p.m. GMT. Eren Sengezer, principal analyst of the European session at FXSTERET, shares its technical perspective for the EUR/USD:
“The EUR/USD returned within the descending regression channel since the end of September after not being stabilized above its upper limit. In addition, the Relative Force Index indicator (RSI) in the daily chart fell below 40, reflecting an increase in the bearish impulse. “
Down, 1,0200 (midpoint of the descending channel) is aligned as immediate support before 1,0100 (round level) and 1,0000 (psychological level, lower limit of the ascending channel). Looking north, the first resistance could be located in 1,0400 (Simple mobile (SMA) of 50 days, upper limit of the descending channel) before 1,0500 (static level) and 1,0640 (100 -day SMA).
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 in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
