- The US Jolts data will be observed closely before the publication of the May NFP Employment Report on Friday.
- Employment offers are expected to decrease slightly to 7.1 million in April.
- The state of the labor market is a key factor for Fed officials by establishing interest rates.
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 April, together with the number of layoffs and resignations.
Jolts data are examined 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 reached 12 million in March 2022, indicating constant cooling in labor market conditions. In January, the number of job offers was exceeding 7.7 million before decreased to 7.2 million in March.
What to expect in the next Jolts report?
Markets expect employment offers to be slightly 7.1 million on the last business day of April. With the growing uncertainty about the possible impact of the commercial policy of the US president, Donald Trump, in the economic and inflationary perspectives, those responsible for the monetary policy of the Federal Reserve (Fed) have been expressing their concerns about a possible cooling in the labor market.
The minutes of the Monetary Policy Meeting of the Fed of May 6 and 7 showed that those responsible for the policy agreed that the risks of an unemployment increase had increased. Even so, the president of the Fed of Dallas, Lorie Logan, argued that the risks to employment and inflation objectives were “reasonably balanced”, adding that he could have “quite a time” see a change in the balance of risk.
It is important to note that the Jolts report refers to the end of April, while the Official Employment Report, which will be published on Friday, measures May data. Regardless of the matched nature of Jolts data, a significant decrease in the number of job offers, with a reading well below 7 million, could feature fears on a weakening of the labor market. In this scenario, the US dollar (USD) is likely to face a renewed sales pressure with the immediate reaction.
On the other hand, an abrupt increase, with a figure in or above 7.7 million, could suggest that the labor market remains relatively stable. The CME Fedwatch tool shows that the markets do not expect the FED to cut the policy rate at the next policy meeting in June, while they value the probability of a reduction of 25 basic points (PBS) in July in July. This market position suggests that a positive surprise could support USD by making investors lean towards a delay in rates reduction until September.
When will the Jolts report be published and how could it affect the EUR/USD?
Employment offers will be published on Tuesday at 14:00 GMT. Eren Sengezer, leading analyst of the European session at FXSTERET, shares its technical perspective for the EUR/USD:
“The short -term technical perspective points to an accumulation of bullish impulse in the EUR/USD. The indicator of the Relative Force Index (RSI) in the daily chart remains about 60 and the pair moves away from the single mobile average of 20 days, currently located in 1,1280, after having fallen below it the previous week.”
“On the positive side, 1,1530-1.1575 (end of the three-month-old bullish trend, maximum of April 21) is aligned as the first region of resistance before 1,1700 (static level, round level) and 1,1780 (upper limit of the ascending channel). Looking south 23.6%) before 1,1200-1.1180 (50-day SMA, lower limit of the ascending channel) and 1,1080 (38.2%fibonacci setback). “
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.
