- Investors will closely monitor JOLTS employment data ahead of the release of the March NFP jobs report.
- Job postings are expected to drop to 8.79 million on the last business day of February.
- Markets see it as very likely that the Fed will cut rates by 25 basis points in June.
The U.S. Bureau of Labor Statistics (BLS) will release the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. The publication will offer data on the evolution of the number of job offers in February, along with the number of layoffs and resignations.
Market participants and Federal Reserve (Fed) policymakers closely scrutinize JOLTS survey data because it can provide valuable insights into supply and demand dynamics in the labor market, a key factor influencing wages and inflation. Although job offers have trended downward in the last year and a half – a sign of a cooling in demand for labor – they remain above pre-pandemic levels.
What to expect from the next JOLTS report?
“Throughout the month, the number of hires and total terminations barely changed, standing at 5.7 million and 5.3 million, respectively,” the BLS notes in its January JOLTS report, adding: “Within dismissals, resignations (3.4 million) and dismissals and dismissals (1.6 million) barely changed.”
After steadily falling from 10.5 million to 8.85 million in the January-October period, job offers appear to have stabilized below 9 million since then. For the next February data, markets expect another slight decline to 8.79 million from 8.86 million in January. In 2019, before the COVID-19 pandemic hit, openings averaged around 7 million. Meanwhile, Non-Farm Payrolls increased by 275,000 in February following January's increase of 229,000 (revised from 353,000).
The US dollar (USD) ended March higher. The Dollar Index (DXY), which measures the valuation of the greenback against a basket of six major currencies, turned higher in the second half of the month and closed in positive territory. Although the Federal Reserve's (Fed) revised Summary Projections (SEP) showed that policymakers still expect the US central bank to reduce the policy rate by a total of 75 basis points (bps) in 2024, the publication of Upbeat macroeconomic data out of the US helped the USD hold firm. According to CME Group's FedWatch tool, markets currently price the probability of a 25 basis point rate cut in June at 65%.
FXStreet analyst Eren Sengezer shares his opinion on the JOLTS job openings data and the possible market reaction:
“If the JOLTS job offer data for February is at 8.5 million or below this figure, it could reaffirm the relaxation of conditions in the labor market and weigh on the immediate reaction of the Dollar. On the other hand On the other hand, a reading near 9.5 million could keep investors from pricing a rate cut in June, at least until Friday's March jobs report, and allow the USD to remain resilient against its counterparts.”
When will the JOLTS report be released and how could it affect EUR/USD?
Job vacancy figures will be published at 14:00 GMT. Eren outlines the key technical levels to watch for EUR/USD ahead of the JOLTS data:
“The 200-day simple moving average and the 38.2% Fibonacci retracement of the latest downtrend form strong resistance at 1.0840-1.0850 for EUR/USD. Should the pair manage to overcome that hurdle, it could attract to technical buyers and target 1.0900 (50% Fibonacci retracement) and 1.0950 (61.8% Fibonacci retracement).”
“On the downside, sellers are likely to remain in control as long as EUR/USD remains below 1.0800 (Fibonacci 23.6% Retracement). The 1.0700 level (end point of the downtrend) could be considered the next support before 1.0650 (static level since November).”
Frequently asked questions about the Fed
What does the Federal Reserve do and how does it affect the dollar?
The monetary policy of the United States is directed by the Federal Reserve (Fed). The Fed has two mandates: achieving price stability and promoting full employment. Your main tool to achieve these objectives is to adjust interest rates.
When prices rise too quickly and inflation exceeds the 2% target set by the Federal Reserve, it raises interest rates, increasing borrowing costs throughout the economy. This translates into a strengthening of the United States Dollar (USD), as it makes the United States a more attractive place for international investors to place their money.
When inflation falls below 2% or the unemployment rate is too high, the Federal Reserve can lower interest rates to encourage borrowing, which weighs on the greenback.
How often does the Federal Reserve hold monetary policy meetings?
The Federal Reserve (Fed) holds eight meetings a year, in which the Federal Open Market Committee (FOMC) evaluates the economic situation and makes monetary policy decisions.
The FOMC is made up of twelve Federal Reserve officials: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the eleven presidents of the regional Reserve banks, who serve for one year on a rotating basis.
What is Quantitative Easing (QE) and how does it affect the USD?
In extreme situations, the Federal Reserve can resort to a policy called Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged 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 of 2008. It involves the Fed printing more dollars and using them to buy high-quality bonds from financial institutions. QE usually weakens the US dollar.
What is Quantitative Tightening (QT) and how does it affect 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 capital of the maturing bonds it has in its portfolio to buy new bonds. It is usually positive for the value of 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.
