AUD/JPY holds gains above 110.00 following Australia’s CPI data

AUD/JPY remains stronger as hot Australian inflation boosts RBA rate hike expectations.
Australia’s Consumer Price Index rose 3.8% YoY in January; Trimmed Mean hit 3.4% YoY.
The Japanese Yen slumped after Mainichi reported Japanese PM Takaichi questioned further BoJ rate hikes.

Akhtar Faruqui FXStreet

AUD/JPY extends its gains for the second successive session, trading around 110.10 during the Asian hours on Wednesday. The Australian Dollar (AUD) receives support against its major peers as hotter-than-expected Australian inflation data fueled expectations of additional interest rate hikes by the Reserve Bank of Australia (RBA) this year.

Australia’s Consumer Price Index (CPI) rose 3.8% year-over-year (YoY) in January, matching the previous reading and exceeding market expectations of 3.7%. The CPI increased 0.4% month-over-month (MoM) in January, easing from 1.0% previously. The RBA’s Trimmed Mean CPI for January rose 0.3% MoM and 3.4% YoY, respectively.

Traders will likely observe the speech from the Reserve Bank of Australia (RBA) Governor Michele Bullock, who is set to speak at a fireside chat at the Melbourne University Faculty of Economics & Business Foundation Dinner in Melbourne, Australia.

The AUD/JPY cross also gained ground as the Japanese Yen (JPY) declined sharply after the Mainichi Shimbun reported that Japanese Prime Minister (PM) Sanae Takaichi expressed concerns about further interest rate hikes during her meeting last week with the Bank of Japan (BoJ) Governor Kazuo Ueda. However, BoJ Governor Ueda stated that the discussion broadly covered economic and financial developments, adding that the Prime Minister made no specific monetary policy requests.

Japanese PM Takaichi is known for her pro-stimulus stance, backing expansionary fiscal measures and accommodative monetary policy. Her position clouds the outlook for BoJ rate hikes, amid speculation the central bank could resume policy normalization later this year.

Economic Indicator

Consumer Price Index (YoY)

The Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, measures the changes in the price of a comprehensive basket of goods and services acquired by household consumers. The indicator is the primary measure of headline inflation after a new methodology was applied to transition from quarterly to monthly readings, applying to data from April 2024 onwards. The YoY reading compares prices in the reference month to the same month a year earlier. A high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.

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