Fed rate hike bets supported as US JOLTS Job Openings expected to signal strong labour demand

• At a forecast 7.28 million in May, US JOLTS job openings would have declined but still exceeded the 2025 average.
• Markets will look to the job openings figures for confirmation of expectations for Federal Reserve interest rate rises.
• With its 13-month lows still relatively close, EUR/USD continues to trade on the back foot.

May’s Job Openings and Labor Turnover Survey (JOLTS), covering US employers’ estimates of vacancies, hiring and staff departures nationwide, is due from the US Bureau of Labor Statistics on Tuesday at 14:00 GMT. Markets pay close attention to the release, which usually precedes a series of employment indicators during the week, ending with the closely followed Nonfarm Payrolls report.

With inflation continuing to rise well above the central bank’s target, markets are reassessing the likelihood of interest rate increases from the US Federal Reserve (Fed). That makes Tuesday’s May JOLTS release particularly significant.

Despite the recent fall in crude oil prices, inflationary pressures have not subsided, while considerable uncertainty persists over the Middle East conflict. Investors’ expectations of at least one rate increase this year have been reinforced by the Fed’s renewed commitment to tackling inflation. Against this backdrop, this week’s labour market releases could prove crucial in judging when the next monetary policy adjustment might come, potentially adding fresh impetus to US Dollar (USD) volatility.

JOLTS job openings forecast to ease but remain above the 2025 average

The market consensus puts May job openings at 7.28 million, a modest fall from April’s 7.61 million, the highest reading since July 2024. Nevertheless, the forecast would represent a solid result, comfortably exceeding the 2025 average of 7.08 million vacancies. Confirmation of these figures would probably support the view that the US labour market is stabilising and reinforce the narrative of US economic exceptionalism.

Against March’s 6.88 million vacancies, April’s JOLTS release showed a stronger-than-expected 4.6% monthly rise in openings, equivalent to 731,000 new vacancies. Quits, layoffs and discharges, meanwhile, were largely unchanged.

Adding to that picture, May’s US Nonfarm Payrolls report showed 172K new jobs, rounding off a strong three-month performance. Confidence in the US economy’s resilience to the Middle East war strengthened as a result. The figures also enabled Fed policymakers to set aside labour market concerns and concentrate exclusively on above-target inflation when shaping near-term monetary policy. In response to this changed backdrop, investors have increased their bets on some policy tightening over the coming months.

Futures markets assign a 30% probability to an interest rate rise at next month’s Federal Open Market Committee (FOMC) meeting and a more than 60% probability to monetary tightening in September, according to the CME Group’s Fedwatch Tool. Those odds have risen from  6% and 20% respectively a month earlier. Investors will scrutinise this week’s employment data to test those expectations.

 EUR/USD trades near 13-month lows ahead of Tuesday’s JOLTS release

Tuesday’s job openings release is scheduled for 15:00 GMT. With EUR/USD still relatively close to its 13-month lows, the pair is heading for a 2.17% fall in June and a decline of nearly 3% over the past two months.

Continued US economic outperformance relative to the Eurozone, alongside the drag on risk appetite from Iran’s war, leaves the pair biased lower in the view of FXStreet analyst Guillermo Alcalá: “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.”

For any recovery, Alcala identifies resistance at 1.1500 and 1.1620-1.1640 as the principal obstacles facing buyers: “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.”