Australian Dollar falls to one-week low vs Yen as soft CPI triggers heavy selling

AUD/JPY attracts heavy selling following the release of soft Australian consumer inflation figures.
Intervention fears prompt some JPY unwinding and further contribute to the steep intraday slide.
The wide interest rate gap between Japan and Australia holds back bears from placing fresh bets.

Haresh Menghani FXStreet

The AUD/JPY cross extends this week's retracement slide from the 114.65 zone, or its highest level since June 3, and attracts some follow-through selling for the second straight day. The intraday decline picks up pace following the release of soft Australian consumer inflation figures and drags spot prices to an over one-week low, around the 113.60 region, in the last hour.

Data published by the Australian Bureau of Statistics (ABS) showed the Consumer Price Index (CPI) increased by 3.8% year-over-year (YoY) in June, compared to a 4% growth reported in May and consensus estimates. Adding to this, the monthly print missed forecasts and fell for the second straight month, by 0.1% in June. The softer CPI report prompted traders to unwind expectations for a near-term Reserve Bank of Australia (RBA) rate hike and weighs heavily on the Australian Dollar (AUD).

The Japanese Yen (JPY), on the other hand, draws support from growing speculations that authorities will step in to prop up the domestic currency. This turns out to be another factor that exerts downward pressure on the AUD/JPY cross and contributes to the steep intraday decline. However, the persistently wide interest rate gap between Japan and other major economies, including Australia, holds back JPY bulls from placing aggressive bets and helps limit further losses for the currency pair.

Furthermore, economic risks stemming from the Middle East crisis warrant some caution before confirming that the AUD/JPY cross has topped out in the near-term and positioning for further losses. Investors might also opt to wait for the crucial Bank of Japan (BoJ) policy decision on Friday before placing fresh directional bets. This, in turn, suggests that any subsequent slide might still be seen as a buying opportunity and is more likely to remain limited amid mixed fundamental cues.

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.

GBP/USD remains slightly bid near 1.3300

GBP/USD now advances marginally and manages to dispute the 1.3300 region on Tuesday. Indeed, Cable regains some balance on the back of the lacklustre performance of the Greenback, all preceding the Fed’s meeting on Wednesday and the BoE’s gathering on Thursday.

EUR/USD recedes from tops, back below 1.1400

EUR/USD manages to set aside part of the recent weakness and clinches decent gains on Tuesday. Indeed, spot keeps the trade below the 1.1400 mark amid acceptable losses in the US Dollar, all following rising optimism of a US-Iran deal and steady caution prior to the FOMC gathering on Wednesday.

Gold defends $4,000; awaits FOMC amid fresh Iran risks

Gold is consolidating above $4,000 as traders opt to wait for the crucial FOMC decision due later this Wednesday for more cues about the Fed's future policy path. The outlook, in turn, will influence the US Dollar and provide some meaningful impetus to the non-yielding bullion. In the meantime, the risk of resumption of US-Iran hostilities continues to remain a drag on the bullion, as Oil prices find fresh demand.

Bitcoin faces muted activity as BitMEX shutdown, FOMC uncertainty weigh on sentiment

Bitcoin eased below $64,000 on Tuesday as traders navigate exchange shutdowns and heightened uncertainty ahead of the Federal Reserve’s policy meeting, according to K33. In a report on Tuesday, K33 noted that BitMEX's decision to shut down marks the end of an important chapter for the crypto derivatives market.

WTI rebounds from two-week low, well bid around mid-$81.00s amid Iran risks

West Texas Intermediate – the benchmark US Crude Oil price – gains strong positive traction during the Asian session on Wednesday, snapping a three-day losing streak to an over two-week low touched the previous day. The commodity currently trades around mid-$81.00s, up nearly 4% for the day, amid the risk of resumption of US-Iran hostilities.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.