US job openings data points to a strong labour market

USD

The dollar continued to trade close to twenty-year highs against both Sterling and the euro on Tuesday as markets began pricing in additional interest rate hikes from the Federal Reserve.

The dollar garnered a wave of support on Friday when Fed Chair Jerome Powell delivered a hawkish tone signalling to markets that interest rates in the US would need to be kept higher for longer to bring down soaring inflation. Powell delivered a stark warning to markets that the US would prioritise tackling inflation over economic growth. Powell warned of a ā€œperiod of slow economic growth and rising joblessnessā€ and stated that markets should not expect the Fed to dial back its monetary policy until the inflation problem is fixed.

Tuesday saw the release of US job openings data which points to a strong US labour market and supports the Fed’s view that interest rates need to increase further in the US. Data released by the Labour Departmentā€™s Job Openings and turn over survey showed that for every unemployed person in the US there were two job openings available, ultimately dismissing recent suggestions the US were in a recession (high unemployment and two consecutive quarters of negative growth). According to the data, job openings increased 199,000 in July to 11,239,000 whilst the June figure was revised higher to show 11,040,000 from 10,698,000.

Investors will focus on this month’s Fed’s rate hike decision as the central bank weighs up a 50 or 75 basis points rate increase. As things stand, money markets are currently pricing a 64% probability of a 75 basis points hike.

EUR

Having fallen below parity against the US dollar last week, the euro has found some brief respite at the start of this week. The uptick in euro support stems from a report released last Friday which suggested a number of policymakers fromĀ the European Central Bank were willing to discuss a 75 basis points hike. The report was followed by official comments from ECB policymakers on Saturday with ECB board member Isabel Schnabel, French central bank Chief Francois Villeroy de Galhau and Latvian central bank Governor Martins all arguingĀ for significant policy action.

Key announcements

09:00 – EUR – Inflation Preliminary (YoY) (Aug) expected 9% vs 8.9%

12:15 – USD – ADP Employment Change expected 200k from 128k