AUD/JPY remains stronger near 96.50 after Australia’s economic data, BoJ policy decision

AUD/JPY rises around 0.50% after registering losses in the previous session, trading around 96.60 during the European hours on Thursday. The currency cross appreciated as the Australian Dollar (AUD) received support after the release of key economic data from Australia and China. It is important to note that any change in the Chinese economy could impact the AUD as China and Australia are close trade partners.

Australia’s Retail Sales climbed 1.2% month-over-month in June, against the previous increase of 0.5% (revised from 0.2%). The reading came in above the market expectations of 0.4%. Retail Sales rose 0.3% QoQ in the second quarter, compared to 0.1% in Q1 (revised from 0%).

China’s NBS Manufacturing Purchasing Managers' Index (PMI) fell to 49.3 in July, as against 49.7 reported in June. The market forecast was 49.7. The NBS Non-Manufacturing PMI eased to 50.1 in July, versus June’s 50.5 and below the estimated 50.3 figure.

The AUD/JPY cross loses ground as the Japanese Yen (JPY) struggles after the Bank of Japan (BoJ) decided to maintain the short-term interest rate target in the range of 0.40%- 0.50% on Thursday, as expected. The Japanese central bank extended the pause into the fourth consecutive meeting after having hiked the interest rate by 25 basis points (bps) to 0.50% in January.

The Bank of Japan released a quarterly Outlook Report, suggesting that underlying inflation is likely to stall due to slowing economic growth but is expected to gradually accelerate thereafter. The outlook remains highly uncertain, particularly concerning trade policy developments and their potential economic impact. The Bank will continue to raise the policy rate if economic conditions and prices evolve in line with its forecasts.