JOLTS Job Openings expected to signal solid US labor market, reinforcing Fed rate hike bets
- US JOLTS are forecast to have eased to 7.3 million in May, yet remaining above the 2025 average.
- Job Openings data will be watched to confirm market expectations of Federal Reserve rate hikes.
- EUR/USD remains on the defensive, with 13-month lows at a relatively short distance.
The US Bureau of Labor Statistics will release the Job Openings and Labor Turnover Survey (JOLTS) for May on Tuesday at 14:00 GMT. The report, which gathers US employers’ estimates of job openings, hires, and separations nationwide, is closely watched by the market as it normally comes ahead of an array of employment gauges released throughout the week, culminating in the key Nonfarm Payrolls report.
May’s JOLTS figures are likely to be closely watched on Tuesday because they come in a crucial moment, with markets repricing chances of interest rate hikes by the US Federal Reserve (Fed) as inflation keeps rising well above the central bank’s target.
A high level of uncertainty surrounds the Middle East conflict, and inflationary pressures have failed to abate despite the recent decline in Crude prices. The Fed has reiterated its commitment to fight inflation, boosting investors’ hopes of at least one rate hike this year. In this scenario, this week’s labour market data might be key to assessing the timing of the next monetary policy move and give a fresh boost to US Dollar (USD) volatility.
What to expect in the next JOLTS report?
Job openings are expected to come in at 7.3 million in May, according to the market consensus. This is a moderate decline from April’s 7.61 million openings, which was the best reading since July 2024, but still a good reading, as it remains significantly above the 2025 average of 7.08 million openings. If these figures are confirmed, they are likely to endorse the theory of a stabilising US labour market and underpin the narrative of US economic exceptionality.
April’s JOLTS data beat expectations with a 4.6% monthly increase in job openings – 731,000 new vacancies – from March’s 6.88 million openings, while quits, layoffs, and discharges were little changed.
Beyond that, the US Nonfarm Payrolls release reported 172K new jobs in May, completing an impressive performance in the three months to May. These figures boosted market confidence about the US economic resilience to the Middle East war and allowed Fed policymakers to forget about the labor market and focus solely on the overshooting inflationary levels to draw their near-term monetary policy. This new scenario has prompted investors to ramp up bets of some monetary policy tightening in the coming months.
Data from the CME Group’s Fedwatch Tool shows that futures markets are pricing a 30% chance of a rate hike at next month’s Federal Open Market Committee (FOMC) meeting, and a more than 60% chance of monetary tightening in September, up from 6% and 20% respectively a month ago. This week’s employment figures will be analysed to contrast these views.
When will the JOLTS report be released and how could it affect EUR/USD?
Job Openings will be published on Tuesday at 15:00 GMT. The EUR/USD is trading at a relatively short distance from the 13-month lows, on track to a 2.17% sell-off in June, and a nearly 3% decline over the last two months.
Guillermo Alcalá, analyst at FXStreet, sees the pair skewed to the downside while the US economy keeps outperforming the Eurozone’s and Iran’s war keeps dampening risk appetite: “The Euro has remained vulnerable over the last two months amid geopolitical woes and a sluggish economic growth in the Eurozone. Unless the scenario changes significantly, Euro rallies are likely to offer good entry opportunities for sellers. The 13-month low at 1.1325 remains the key support level. Further down, bears might be tempted to revisit the late May 2025 low at 1.1210.”
To the upside, Alcala sees the 1.1500 and the 1.1620-1.1640 resistance areas as the main hurdles for bulls: “The pair is struggling to consolidate above 1.1400 at the time of writing in a rebound from the mentioned 13-month lows, which, so far, seems corrective. Bulls should break the 1.1500 area (June 8,11 lows) and preferably also the area between 1.1620 and 1.1640, where late May and early June highs meet the descending trendline from the year-to-date (YTD) highs, to break the negative structure.”
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.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens 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 principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
FXStreet Team
FXStreet
Composed of a group of economic journalists and FX experts, the FXStreet content team produces and oversees all content published on FXStreet. It provides a purely journalistic approach to the Forex market.
