JOLTS Data Friendly to Bonds

MACRO FRAME

Markets resume news flow trading, while inflation prints from Europe confirmed the conflict’s impact on energy prices. Meanwhile, February’s JOLTS makes the case for Fed easing later in the year.

STOCK INDEX FUTURES

US equity index futures are higher as buy first ask questions later takes ahold of markets amid a flurry of news headlines. President Trump posted on social media that Iran had asked for a ceasefire, which the US will not consider unless the Strait of Hormuz is open. This follows a Bloomberg TV headline on Tuesday that included the headline: “Iran President Says Ready to End War: IRNA.” Bloomberg, citing a report from IRNA, wrote that Iran’s President Masoud Pezeshkian told a European official that Iran has “the necessary will to end this war.” The report added Iran expects “the essential guarantees to prevent the recurrence of aggression” among other requirements. The headline and market reaction reinforce the view that equities are in an environment where trading is determined by news flow and less technical and fundamental factors.

JOLTS data revealed that job openings held relatively steady while hiring fell to its lowest rate in nearly six years, signaling that employers are filling fewer positions even as demand for workers remains nominally elevated. The quits rate, a key proxy for worker confidence, ticked down to its lowest level in years, suggesting employees are becoming more cautious about voluntarily leaving jobs.

Markets will look ahead to ISM’s March Manufacturing PMI survey for further clues on how business activity has held up in the face of the conflict. S&P Global’s manufacturing PMI data revealed that business confidence had improved on the back of reduced tariff burdens and stronger domestic demand for US goods, though goods stockpiling may have biased the figure upwards.

Watch point: Material signs of de-escalation will support equities, though the conflict presents real risks to future gains in the absence of certainty.

CURRENCY FUTURES

US DOLLAR: The USD is 0.50% lower to 99.47 as oil prices slipped, while an unconfirmed report that Iran’s president may be willing to end the war and a soft JOLTS February JOLTS report weighed on the dollar. The dollar suffered most of its losses on Tuesday following an Iranian state media report that President Masoud Pezeshkian had said his country was willing to end the war. President Trump also posted on Social Media that Iran had asked for a ceasefire, which the US would not consider unless the Strait of Hormuz is open. That news further lifted risk sentiment across markets and reduced the dollar’s safe haven appeal, even as energy prices remain elevated.

Meanwhile, February’s JOLTS data confirmed a stable labor market but revealed that the hiring rate fell to its lowest level since April 2020, while the quits rate also fell to a multi-year low. The figures are not consistent with a robust labor market and have likely taken a move up from the Fed entirely off the table, a factor that had previously been offering the dollar support. Dollar flows ahead of Friday’s labor data are likely to remain subject to news flow headlines.

Watch point: JOLTS data confirms that a move up from the Fed is out of the picture and reinforced the narrative that the Fed is well positioned in its policy rate.

EURO: The euro jumped 0.55% to $1.1616 as risk sentiment has returned across markets following the Iranian state news report and social media post from President Trump. Euro area headline inflation jumped to 2.5% year-on-year in March 2026, up sharply from 1.9% in February. The rise in inflation is almost entirely the product of higher energy prices, which swung from -3.1% YoY in February to +4.9% in March, the single largest monthly swing in the energy component since the post-pandemic inflation surge. Core inflation held steady at 2.3%, unchanged from February, while a narrower measure that excludes food, energy, alcohol and tobacco held steady at 2.2%, unchanged from February. Services inflation, the stickiest and most policy-relevant component, actually eased to 3.2% from 3.4% in February.

The inflation data confirms what markets were already expecting: the price shock is geopolitically sourced and energy concentrated, not demand driven. Taken alone, the data does not provide a compelling case for immediate ECB tightening. The critical risk factor is not the current inflation print but the persistence of the energy shock.

Watch point: March’s inflation data confirmed that headline inflation was dragged higher by rising energy prices, while other components were reassuring to the broader inflationary picture. A rate hike at the ECB’s April meeting appears unlikely, while the risk of prolonged conflict in Iran builds the case for a June hike.

BRITISH POUND: Sterling is 0.63% higher at $1.3306, gaining as risk sentiment was lifted across markets. Markets are pricing 55 bps of tightening by year-end, down from over 75 bps prices last week as market hopes that the conflict in Iran will end soon ease tightening expectations across several major central banks. Further news and material evidence that the Strait of Hormuz will open is likely to further weigh on rate hike prospects from the Bank of England.

Economic data showed last week British business activity has grown at the slowest pace in six months and manufacturers’ input costs accelerated at the fastest rate since 1992, while retail sales fell. The conflict in Iran has taken UK politics out of the spotlight, though local elections in early May create further risk of volatility. Keir Starmer’s governing Labour Party is trailing the populist Reform UK and the left-wing Green Party.

Watch point: Signs of de-escalation between the US and Iran are likely to provide short-term support to GBP, but evidence of an increase in inflation presents a downside to growth and will put the BoE in a bind.

JAPANESE YEN: The yen strengthened 0.11% against the dollar to 158.55 as hopes of de-escalation in the Middle East supported the currency. Meanwhile, the Bank of Japan’s sentiment index for large manufacturers edged up to 17 in Q1 2026, beating market estimates of 16 and marking the highest level since Q4 2021. The uptick suggested Middle East conflict risks have yet to dent business morale. Confidence strengthened across multipole sectors, while weaker reading came from the textiles industry. Simultaneously, large firms revealed they plan to lift capital expenditure by just 3.3% in Q1, sharply down from 12.6% previously and the softest rise since Q1 2023, reflecting high borrowing costs and intensifying geopolitical uncertainty. Elsewhere, Japan’s manufacturing PMI was revised slightly upward to 51.6 in March from a preliminary estimate of 51.4. Market implied odds continue to expect a rate hike from the BoJ in July.

Watch point: A confirmed April hike could pull USD/JPY closer to 155, particularly if US yields stabilize; however, renewed US dollar strength or further escalation in the Middle East could limit yen gains despite BoJ normalization.

AUSTRALIAN DOLLAR: The Aussie rose 0.54% $0.6939 as an increase in risk sentiment supported the risk-sensitive currency. Markets imply around a 65% chance the RBA could hike again at its next meeting on May 5, but have lowered the expected peak to 4.66% from 4.75% early in the week. The RBA raised rates in a 5-4 vote, though Governor Michelle Bullock said the split in votes was less a disagreement on policy direction but on timing. Analysts at HSBC now expect Australia’s economy to contract in the second quarter after two rate hikes this year, and higher fuel prices to weaken consumer spending.

TREASURY FUTURES

Yields are little changed across the curve following several news headlines and reports that have fueled expectations of an end to the conflict in Iran. Tuesday’s JOLTS data was friendly to bond prices as although it reinforced the case for a Fed hold, the data ruled out the need for tightening. Total job openings were little changed at 6.9 million in February, with a rate of 4.2%, down 0.2% from January’s revised 4.4%. On a YoY basis, openings are essentially flat, they stood at 7.242 million in February 2025, suggesting the broader trend of gradual cooling from 2022’s record highs has stabilized.

The hires number is the most alarming data point in this report. Total hires fell −498,000 to 4.849 million, dropping the hires rate to 3.1%, the lowest level since April 2020, when labor markets were in freefall at the onset of the pandemic. On a YoY basis, hires are down 387,000 from February 2025’s 5.236 million.

The gap between job openings (6.9M) and hires (4.8M) remains historically wide, roughly 1.4 openings per hire, indicating that while positions are being posted, employers are either moving slowly to fill them, or candidates are not matching requirements.

Layoffs and discharges edged up to 1.721 million (rate: 1.1%), +61,000 from January’s 1.660 million, though still below the February 2025 level of 1.867 million. The overall layoffs rate remains historically low and does not yet signal an acute deterioration. Meanwhile, the quits rate remained at 1.9%, reinforcing the narrative that workers are reluctant to leave their current jobs in an uncertain labor market. Taken together, the labor market is softening but not breaking, though the weak hiring figures do present real risks to the Fed’s dual mandate and support the case for Fed easing later in the year.

Watch point: Following Tuesday’s JOLTS data, upcoming nonfarm payroll figures will be watched for clues on when, not if, the Fed will cut rates later in the year. We look for the Fed to lower rates

The spread between the two- and 10-year yields is 52.20 bps, while the two-year yield, which reflects short-term interest rate expectations, is 3.803%.

 

 

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