USD Consolidates Friday’s Gains; Japan’s GDP Helps Yen

The US dollar continued to trade well-bid and mostly kept the substantial gains it made on Friday. The US economy created a surprising 280,000 thousand new jobs during May; much more than economists’ forecasts of 225,000 net new positions. The unemployment rate ticked up to 5.5% from 5.4% the previous month, but this was because of new job-seekers entering the labor force. Furthermore, average hourly earnings also surprised on the upside by coming in at 0.3% instead of 0.2% expected. The next major reference point for the US economy will be May retail sales to be released on Thursday.

The labor market’s strong performance helped the dollar post significant gains versus its major counterparts such as the euro, the yen and the pound. The dollar managed to register a 13-year high versus the yen at 125.85 on Friday, but better-than-expected Japanese GDP numbers halted the dollar’s ascent.

The Japanese economy grew by 1% quarter-on-quarter during the January-March period, a revised estimate of the country’s GDP showed. This was above expectations of a 0.7% growth rate and well above the previous estimate of 0.6%. More key data is expected out of Japan this week as machine orders and consumer confidence will be keenly watched.

In other news from the wider region, Chinese trade surplus for May was much larger-than-expected but mainly due to a sharp fall in imports rather than better export performance. This cast some clouds over China’s ability to grow its economy fast this year. The data led to some slight selling in the aussie, which came very close to trade below the 76 cents versus the US dollar, but it managed to rebound later in the session to around 0.7644.

In Europe, German industrial production for April was better-than-expected on Monday morning. The remainder of the day is likely to be quiet as no major economic data is expected.

In emerging market currencies, the Turkish lira fell 5 percent against the US dollar to the 2.80 Turkish lira per dollar level as the country’s ruling party failed to secure a majority of MPs in parliamentary elections. This could potentially usher in a period of political uncertainty in the country.