AUD/JPY breaks above 91.70 despite Australian GDP trims to 5.9%
- AUD/JPY has attempted a break above the 91.70 hurdle despite weaker-than-projected Australian GDP data.
- The annual and quarterly Australian GDP has declined to 5.9% and 0.6%, respectively.
- A decline in China’S inflation would propel PBOC to announce more policy-easing measures.
The AUD/JPY pair has overstepped the critical resistance of 91.70 despite a weaker-than-projected Australian Gross Domestic Product (GDP). The annual GDP data has landed at 5.9%, lower than the expectations of 6.3% and the prior release of 3.6%. While quarterly GDP data has been reported lower at 0.6% vs. the projections of 0.7% and the former release of 0.9%.
Weaker-than-projected Australian GDP data will support the Reserve Bank of Australia (RBA) in meeting its agenda of achieving price stability. The cross remained extremely volatile on Tuesday after the RBA hiked its Official Cash Rate (OCR) consecutively for the third time by 25 basis points (bps). This has pushed the Australian interest rates to 3.10%. The decision of a 25 bps rate hike was very much in line with the estimates.
On interest rate guidance, RBA Governor Philip Lowe said that further tightening of monetary policy is likely to be forthcoming. The RBA is not in a hurry to pause interest rate hikes any sooner, as the current inflation rate at 6.9% is far from the targeted rate of 2%. Therefore, more policy-tightening measures cannot be ruled out.
This week, investors will keep an eye on China’s Consumer Price Index (CPI) data, which will release on Friday. The annual CPI is expected to drop vigorously to 1.0% from the prior release of 2.1%. This could force the People’s Bank of China (PBOC) to ease policy further. It is worth noting that Australia is a leading trading partner of China, and monetary easing in China will strengthen the Australian Dollar.
Meanwhile, Japanese yen investors are awaiting Thursday’s GDP data. The economic data is expected to contract by 1.1% against the prior contraction of 1.2%. While the quarterly data is likely to contract by 0.3%, similar to the prior release.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
