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• JOLTS report will be watched closely by Fed officials ahead of September jobs data.
• Job openings are forecast to hold steady at around 8.8 million on the last business day of August.
• US labor market conditions remain out of balance despite Fed rate hikes.

The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday by the US Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in August, alongside the number of layoffs and quits.

JOLTS data will be scrutinized by market participants and Federal Reserve policymakers because it could provide valuable insights regarding the supply-demand dynamics in the labor market, a key factor driving up salaries and inflation. 

What to expect in the next JOLTS report?

The number of job openings on the last business day of August is forecast to stay little changed at around 8.8 million. “Over the month, the number of hires and total separations changed little at 5.8 million and 5.5 million, respectively,” the BLS  noted in July’s JOLTS. “Within separations, quits (3.5 million) decreased, while layoffs and discharges (1.6 million) changed little,” the publication further read.

Job openings have declined steadily since April, falling from 10.3 million to 8.8 million in July. Following the September policy meeting, Federal Reserve (Fed) Chairman Jerome Powell acknowledged that the supply and demand in the labor market continued to come into a better balance but noted that conditions were still tight. Although the revised Summary of Economic Projections showed that the majority of policymakers saw it appropriate to raise the policy rate one more time before the end of the year, market participants are still pricing in a more than 50% probability that the interest rate will be held steady at the 5.25%-5.5% range this year, according to the CME Group FedWatch Tool.

FXStreet Analyst Eren Sengezer shares his view on the importance of the JOLTS Job Openings data and the potential market reaction:

“Growing fears over a government shutdown in the US triggered a sell-off in US government bonds toward the end of September and surging yields provided a boost to the US Dollar (USD). With US Congress passing a stopgap funding bill to avert a shutdown until November 17, investors could shift their attention back to US data releases and their potential impact on the Fed’s policy outlook.”

“Ahead of Friday’s September jobs report, a smaller-than-expected Job Openings reading, at or below 8.5 million, could attract dovish Fed bets and weigh on the USD. On the other hand, an unexpected increase in the data with a print of 9.5 million or higher could provide a boost to the currency. Given the USD’s overbought conditions, however, the market reaction to a weak figure is likely to be more severe than a reaction to a positive surprise.”

When will the JOLTS report be released and how could it affect EUR/USD?

Job openings data will be published at 14:00 GMT. EUR/USD closed every week of September in the red and lost 2.5% on a monthly basis. If the JOLTS report reaffirms cooling conditions in the labor market, the pair could gather recovery momentum.

Eren points out key technical levels to watch for EUR/USD ahead of JOLTS data:

“EUR/USD dropped below the lower limit of the descending regression channel coming from late July and the Relative Strength Index (RSI) indicator on the daily chart dropped below 30 early Tuesday, suggesting that the pair could stage a correction before the next leg lower”

“1.0500 (static level, psychological level) aligns as a key pivot point for the pair. If EUR/USD fails to reclaim that level and continues to use it as resistance, 1.0415 (static level from November 2022) could be set as the next bearish target before 1.0350 (static level from May 2022). On the flip side, buyers could show interest if the pair climbs out of the descending channel by stabilizing above 1.0600. Above that level, 1.0650 (20-day Simple Moving Average) could be seen as next resistance before 1.0700 (static level, psychological level)”

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• United States Census Bureau will release the July Retail Sales data on Tuesday, August 15.
• US Retail Sales are seen advancing by 0.3% in July after rising less than forecast in June.
• Strong US Retail Sales could revive hawkish Fed bets, boosting the US Dollar.

The United States (US) Census Bureau will publish the country’s Retail Sales report on Tuesday, which is expected to show that the headline Retail Sales number will rise for the third straight month in July. The US consumer spending is likely to show continued resilience, indicating an optimistic outlook for the economy heading into the third quarter.

The United States Dollar (USD) has been consolidating at its highest level in four weeks even after tame United States Consumer Price Index (CPI) data, which briefly cemented expectations that the US Federal Reserve (Fed) is nearing the end of its tightening cycle. US annual headline CPI rose 3.2% in July against a 3.0% increase recorded in June and 3.3% expectations. The Core CPI inflation ticked down to 4.7% YoY in the reported period vs. a 4.8% clip estimated. On a monthly basis, both the headline and Core inflation figures met expectations, arriving at 0.2%.

However, San Francisco Fed President Mary Daly came to the rescue of the Fed hawks, as she said in an interview with Yahoo Finance that “it is not a data point that says victory is ours. There’s still more work to do. And the Fed is fully committed to resolutely bringing inflation back down to its 2% target.”

As the Fed policymakers have repeatedly said that monetary policy moves will depend on incoming data, the focus shifts toward the US Retail Sales report. The high-impact US data release could prompt markets to re-price the Fed interest rate outlook, ramping up volatility around the US Dollar.

What to expect in the July US Retail Sales report?

The headline Retail Sales are likely to increase 0.4% over the month in July, at a slightly faster pace from the 0.2% growth seen in June. Core Retail Sales, excluding autos, are also seen rising 0.4% in July, as against a 0.2% increase recorded in June. US Retail Sales Control Group is expected to increase 0.5%, courtesy of the growth in online sales.  
It’s worth mentioning that the Retail Sales data is adjusted for seasonality but not for inflation.

The potential growth in US Retail Sales could continue to show robustness in consumer spending, despite the Federal Reserve’s implementation of 500 basis points (bps) worth of interest rate hikes since March 2022.

The July retail volume data came in mixed, suggesting a slowdown in the momentum of spending growth. However, that did not alter the Federal Reserve’s decision to hike the policy rate, federal funds rate, by 25 bps to the range of 5.25-5.5% last month.

According to analysts at BBH, “markets should not just rely on retail sales data to gauge the strength of the consumer, as it only covers goods. Personal spending covers services as well and will give a much fuller picture, but the July reading won’t be reported until July 28 along with PCE data.” 

When will US July Retail Sales data be released and how can it affect EUR/USD?

The US Retail Sales data for July is due to be published at 12:30 GMT on Tuesday, August 15. Investors are weighing in on the next Fed policy path, keeping the upside capped in the US Dollar. Therefore, the EUR/USD pair could extend its bearish consolidative phase. Upbeat US Retail Sales data could reinforce the buying interest in the Greenback, fuelling a fresh downtrend in the main currency pair.

Conversely, if the details of the Retail Sales report disappoint, hopes of any further Fed rate hike will be crushed alongside the US Dollar. Worries over a potential ‘soft-landing’ will resurface, which could limit the US Dollar’s weakness. Markets are currently pricing in about a 25% probability of one more Fed rate increase this year, as per the CME Group FedWatch Tool.

Meanwhile, Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “The 14-day Relative Strength Index (RSI) on the daily chart retreated below 50 and EUR/USD closed below the 100-day Simple Moving Average (SMA) for the first time in nearly two months, reflecting a bearish bias.”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the downside, 1.0850 (static level) aligns as interim support before 1.0770 (200-day SMA) and 1.0680 (static level from June). Looking north, buyers could show interest in case EUR/USD makes a daily close above 1.0940 (100-day SMA) and starts using that level as support. In that scenario, 1.1000 (20-day SMA, psychological level) could be seen as the next recovery target ahead of 1.1150 (July 27 high).”

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• Federal Reserve is widely expected to leave its policy rate unchanged at 5-5.25%.
• Fed will publish the revised Summary of Economic Projections in June. 
• US Dollar valuation could be impacted by dot plot and FOMC Chairman Powell’s comments.

The Federal Reserve (Fed) is expected to leave its policy rate unchanged at the range of 5%-5.25% on Wednesday, June 14 at 18.00 GMT. 

The Fed will release the revised Summary of Economic Projections (SEP), the so-called dot plot, and FOMC Chairman Jerome Powell will comment on the policy decisions and economic outlook in the post-meeting press conference. 

The market positioning suggests that a no change in the Fed’s policy rate is nearly fully priced in, especially after the data from the US showed that the Consumer Price Index (CPI) rose 4% on a yearly basis in May, down sharply from the 4.9% increase recorded in April. According to the CME Group FedWatch Tool, the probability of a 25 basis points Fed rate hike in June is less than 10%.

Analysts at Rabobank see the US central bank resuming the hiking cycle in July:

“Given Powell’s bias toward a pause in June, we expect the FOMC to keep the target range for the federal funds rate unchanged this month.”

“However, because of the reacceleration of the economy, and the modest impact of the banking turmoil on credit conditions, we now expect the FOMC to resume the hiking cycle in July in order to get inflation under control. For now, we expect one rate hike of 25 bps, followed by a longer pause, at least through the end of the year.” 

Federal Reserve interest rate decision: What to know in markets on Wednesday, June 14

• The US Dollar Index, which tracks the USD’s performance against a basket of six major currencies, continues to decline heading into the Fed decision, reflecting a broad USD weakness. 
• The benchmark 10-year US Treasury bond yield dropped below 3.7% with the initial reaction to the US inflation data but recovered toward 3.8% on Wednesday.
• Wall Street’s main indexes closed in positive territory on Tuesday. The S&P 500 Index reached its highest level since late April above 4,300.
• On Thursday, the US Census Bureau will release Retail Sales report for May. The Fed’s Industrial Production will also be featured in the US economic docket alongside the weekly Initial Jobless Claims data this week. 
• The European Central Bank (ECB) is expected to hike its key rates by 25 bps.
• On a monthly basis, the Producer Price Index (PPI) in the US declined 0.3% in May. The annual producer inflation fell to 1.1% from 2.3% in April.

When is the Fed meeting and how could it affect EUR/USD?

The Federal Reserve is scheduled to announce its interest rate decision and publish the revised Summary of Economic Projections (SEP), the so-called dot plot, this Wednesday, June 14, at 18:00 GMT. This will be followed by the post-meeting FOMC press conference at 18:30 GMT. Investors expect the Fed to leave the policy rate unchanged but see a strong probability for at least one more rate hike this year.

Following the collapse of several mid-sized banks in the United States, the Fed unexpectedly changed its policy language in March and said “some additional policy firming” may be appropriate to bring down inflation, dropping the reference to “ongoing increases.” In May, the Fed raised its policy rate by 25 basis points (bps) to the range of 5%-5.25%. In the ensuing press conference, FOMC Chairman Jerome Powell acknowledged that it was difficult to predict how much credit tightening will replace the need for any further rate hikes. Powell, however, reiterated that it would not be appropriate to cut rates later in the year, given the view that inflation will take some time to come down.

In March, the Fed’s SEP showed that the median view of the policy rate at end-2023 stood at 5.1%, matching December’s projection. The publication further revealed that policymakers saw a slower Gross Domestic Product (GDP) growth in 2023, alongside lower unemployment and less progress on inflation than they saw in December. Finally, projections pointed to a total of 75 bps of rate cuts in 2024.

Unless the Fed delivers a significant hawkish surprise by going against the market expectation and raising the interest rate by 25 bps, the US Dollar’s performance is likely to be effected by the terminal rate projection in the dot plot, which can confirm whether the Fed leaves the door open to additional rate hikes even if the policy rate is left unchanged in June. 

Previewing the Fed event, “we still think the bar for restarting hikes in July will be high unless inflation pressures clearly accelerate over summer, which we consider unlikely,” said analysts at Danske Bank. “We make no changes to our forecasts, and expect the Fed to maintain rates at the current level for the remainder of the year. A pause could pose near-term upside risks to EUR/USD, but we still maintain a bearish view on the cross towards H2.”

Eren Sengezer, European Session Lead Analyst at FXStreet, shares his outlook for EUR/USD: “A 25 bps Fed rate hike or a terminal rate projection above 5.5% could trigger a decisive rally in the US Dollar and weigh heavily on EUR/USD. On the flip side, a no change in the policy rate combined with a downward revision to end-2024 rate projection could provide a boost to the pair. Market participants will also pay close attention to Powell’s comments. If Powell mentions that credit tightening is less severe than initially feared, that could be seen as a hawkish tone, helping USD stay resilient against its rivals and vice versa. On the other hand, the USD is likely to come under selling pressure in case Powell sounds concerned about the economic activity losing momentum.”

“The near-term technical outlook is yet to show a convincing bullish sign. The Relative Strength Index (RSI) indicator on the daily chart stays slightly above 50 and EUR/USD failed to make a daily close above the 100-day Simple Moving Average (SMA), currently located at 1.0800, despite having climbed above this level on Tuesday.”

“In case the pair confirms 1.0800 as support, it is likely to face resistance at 1.0860 (Fibonacci 50% retracement) before targeting 1.0900 (psychological level, Fibonacci 61.8% retracement) and 1.0960 (static level from early April).”

“On the downside, EUR/USD could slide toward 1.0750 (Fibonacci 23.6% retracement) and 1.0700 (psychological level, static level) if it returns below 1.0800,” Eren explains.

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About Federal Reserve

The Federal Reserve System (Fed) is the central banking system of the United States and it has two main targets or reasons to be: one is to keep unemployment rate to their lowest possible levels and the other one, to keep inflation around 2%. The Federal Reserve System’s structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.