Australian Dollar strengthens against Japanese Yen following CPI data

AUD strengthens after Australia's July CPI hit 3.5% YoY, beating the 3.2% forecast despite easing from June's 3.8%.
Australia's July CPI rose 1.0% MoM, beating forecasts, while annual Trimmed Mean CPI increased 3.6%.
Japan's service-sector inflation reached 3.6% in July, reinforcing BoJ views that tight labor markets drive consumer price increases.

Akhtar Faruqui FXStreet

AUD/JPY gains ground for the second consecutive day, trading around 114.20 during the Asian hours on Wednesday. The currency cross remains stronger as the Australian Dollar (AUD) gains ground after the Consumer Price Index (CPI) climbed 3.5% year-over-year (YoY) in July, compared with 3.8% growth in June. The market forecast was a 3.2% print for the reported period.

Australia’s monthly Consumer Price Index rose 1.0% in July, up from a 0.1% decrease, beating the estimated 0.8% increase. Meanwhile, the Trimmed Mean CPI increased 0.5% MoM in July. Annually, the Trimmed Mean CPI advanced 3.6% YoY during the same period.

The AUD/JPY cross has appreciated as the Japanese Yen (JPY) faces challenges from Japan’s expansionary fiscal policy, high national debt, and a wide interest-rate differential with other major economies. However, potential losses for the Yen may be limited by growing expectations of further Bank of Japan tightening, with markets currently pricing in a rate hike next month.

Yen focus shifts to BoJ tone beyond September meeting

Strategists at Scotiabank highlight that, with markets increasingly looking past the September 18 BoJ decision, “greater risk will center around the central bank’s tone as market participants look beyond the September 18 meeting.” They note that investors are likely to scrutinize the Bank’s communication for guidance on the subsequent policy path, rather than the single event itself.

Underpinning these tightening expectations, fresh data released on Wednesday showed that a key gauge of Japan's service-sector inflation rose 3.6% year-over-year in July. This increase reinforces the central bank's perspective that a tight labor market is actively encouraging firms to pass rising operational costs on to consumers.

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.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?

The Euro is not the sick man of Europe. France's bond market is

EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.