The Job Openings and Labor Turnover Survey (JOLTS) will be released on Thursday, July 6, by the US Bureau of Labor Statistics (BLS). The publication will reveal the change in the number of job openings in May, alongside the number of layoffs and quits.
JOLTS data will be scrutinized by market participants as it could provide valuable insights regarding the supply-demand dynamics in the jobs report.
The number of job openings on the last business day of May is forecast to decline to 9.93 million from 10.1 million in April. "Over the month, the number of hires changed little at 6.1 million. Total separations decreased to 5.7 million," the BLS said in April’s JOLTS. "Within separations, quits (3.8 million) changed little, while layoffs and discharges (1.6 million) decreased."
The Federal Reserve (Fed) has been paying close attention to the job openings data to assess whether labor market conditions remain tight. In May, the BLS reported that there were more than 6 million unemployed. Following the June policy meeting, Fed Chairman Jerome Powell acknowledged that they were observing sings of softening in the labor market but noted that demand and supply were still out of balance. Nearly 10 million job openings for around 6 million unemployed means that there are still more than 1.5 jobs for each person looking for work. Fed officials are concerned that the slow recovery in the supply side of the labor market could lead to higher wages and make it difficult for them to bring inflation back to target.
FXStreet Analyst Eren Sengezer thinks that a reading above 10 million could feed into expectations for two more 25 basis points Fed rate hikes in the remainder of the year.
“Following three straight months of declines, the number of job openings rose back above 10 million in April,” Eren notes. “Another reading above 10 million should allow the Fed to continue to raise rates without worrying about hurting the labor market. On the other hand, a noticeable decline toward 9.5 million could cause hawkish Fed bets to recede at least until Friday’s jobs report.”
Job openings data will be published on Thursday, July 6, at 14:00 GMT. The report could influence the US Dollar’s (USD) valuation, with market participants trying to figure out whether the Fed will continue to tighten the policy later in the year. “We believe there's more restriction coming, driven by labor market,” Powell said when speaking at a policy panel at the 2023 ECB Forum on Central Banking.
Eren shares his views on how EUR/USD could react to JOLTS data:
“The Relative Strength Index (RSI) indicator on the daily chart declined below 50 and EUR/USD closed below the 20-day Simple Moving Average on Wednesday, pointing to a bearish tilt in the short-term outlook. With an upward surprise, the pair could continue to stretch lower. In that case, 1.0820 (100-day SMA) aligns as key support. A daily close below that level could open the door for an extended slide toward 1.0760 (static level) and 1.0700 (psychological level, static level”
"A noticeable decline in job openings could weigh on the USD and help EUR/USD recover toward 1.0900 (psychological level, 20-day SMA). If the pair rises above that level and confirms it as support, 1.0950 (static level) and 1.1000 (psychological level) could be set as next bullish targets."
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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