- AUD/JPY has dropped firmly amid expectations that the Australian economy saw an inflation peak in Q4 last year.
- The RBA might continue hiking interest rates as the inflation rate is far from the 2.0% inflation target.
- Japan’s officials are continuously reiterating the need for wage growth for the BoJ and the government.
The AUD/JPY pair has slipped below 91.60 after failing to kiss the crucial resistance of 92.00 in the late New York session. The risk barometer has lost strength and is declining after commentary from the Reserve Bank of Australia’s (RBA) head of economic analysis Marion Kohler.
RBA’s Kohler believes that the Australian economy has seen inflation peak at 7.8% in the fourth quarter of CY2022, and the price pressures may start declining ahead. Last week, the Australian Bureau of Statistics reported a jump in the inflation rate to 7.8% amid supply chain bottlenecks and rising food prices.
Meanwhile, a decline in monthly Retail Sales (Dec) data released this week supports the view of RBA’s Kohler of inflation softening ahead. The economic data contracted by 3.9% from an expansion of 1.7% released in November, while the street expected a contraction of 0.3%. A contraction in retail demand is a critical indicator for inflation projection. Lower consumer spending calls for a decline in producers' prices of goods and services at factory gates to maintain the demand-supply mechanism.
However, RBA Governor Philip Lowe might continue hiking interest rates further as the road to recovery is far from over. The RBA is expected to continue the 25 basis points (bps) interest rate hike spell to tame stubborn inflation.
On the Japanese Yen front, Japan's Finance Minister Shunichi Suzuki reiterated Tuesday that “wage increases are important to both the government and the Bank of Japan (BoJ).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD alternates gains with losses near 1.0720 post-US PCE
The bullish tone in the Greenback motivates EUR/USD to maintain its daily range in the low 1.070s in the wake of firmer-than-estimated US inflation data measured by the PCE.
GBP/USD clings to gains just above 1.2500 on US PCE
GBP/USD keeps its uptrend unchanged and navigates the area beyond 1.2500 the figure amidst slight gains in the US Dollar following the release of US inflation tracked by the PCE.
Gold keeps its daily gains near $2,350 following US inflation
Gold prices maintain their constructive bias around $2,350 after US inflation data gauged by the PCE surpassed consensus in March and US yields trade with slight losses following recent peaks.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.