AUD/JPY stands tall above 97.00 mark, weekly top after Chinese inflation figures

AUD/JPY struggles to capitalize on the modest Asian session uptick to a fresh weekly top.
The better-than-expected Chinese inflation figures fail to impress bulls or provide impetus.
BoJ rate cut bets, geopolitical risks lend some support to the JPY and cap gains for the cross.

Haresh Menghani FXStreet

The AUD/JPY cross gains positive traction for the fourth successive day and climbs to a fresh weekly top during the Asian session on Friday. Spot prices currently trade around the 97.20-97.25 region and move little following the release of Chiese inflation figures.

The Australian Dollar (AUD) continues to draw support from the Reserve Bank Australia's (RBA) hawkish stance, showing the willingness to hike interest rates further to suppress still sticky inflation. Apart from this, a generally positive tone around the equity markets undermines the safe-haven Japanese Yen (JPY) and benefits the risk-sensitive Aussie. Bulls, meanwhile, seem rather unimpressed by the mostly better-than-expected Chinese inflation figures.

In fact, the National Bureau of Statistics reported this Friday that consumer prices in China rose by 0.5% in July from a year ago as compared to the 0.2% increase in June and expectations for a reading of 0.3%. Additional details revealed that the headline CPI climbed 0.5% in July, the highest since February. That said, the Producer Price Index shrank for a 22nd consecutive month and came in at -0.8% for July as compared to -0.9% estimated.

The Japanese Yen (JPY), on the other hand, is underpinned by bets for at least one more interest rate hike by the Bank of Japan (BoJ) by the end of the current fiscal year, bolstered by Governor Kazuo Ueda's hawkish comments last week. Meanwhile, the reaction to BoJ Deputy Governor Shinichi Uchida's remarks earlier this week, downplaying the chances of a near-term rate hike, seems to have faded amid the recent unwinding of the JPY carry trades.

Hence, it is prudent to wait for some follow-through buying before confirming that the AUD/JPY cross has formed a near-term bottom ahead of the 90.00 psychological mark, or the lowest level since May 2023 touched earlier this week. Nevertheless, spot prices remain on track to register weekly gains for the first time in the previous five as the market attention now shifts to next week's release of the Australian Wage Price Index and monthly jobs report.

Economic Indicator

Producer Price Index (YoY)

The Producer Price Index released by the National Bureau of Statistics of China is a measurement of the rate of inflation experienced by producers. It captures the average changes in prices received by Chinese domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods). Changes in the PPI are widely considered as an indicator of commodity inflation. If the Producer Price Index increase is excesive, it would indicate that inflation has become a destabilizing factor in the economy, The People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, whereas a low reading is seen as negative (or bearish) for the CNY.

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.