- AUD/JPY displayed wild movements after the release of Australian inflation data.
- Monthly Australian inflation soared to 6.8% vs. the estimates of 6.4%.
- Weak Chinese factory activity for May has weighed immense pressure on the Australian Dollar.
The AUD/JPY pair has surrendered quick gains made after the release of the higher-than-anticipated monthly Australian Consumer Price Index (CPI). The risk barometer has dropped below 91.00 and is expected to remain vulnerable ahead.
Australia’s monthly inflation (April) has accelerated to 6.8% while the street was anticipating a marginal rebound to 6.4% from the former release of 6.3%. This could be the reason why the Reserve Bank of Australia (RBA) decided to raise interest rates surprisingly by 25 basis points (bps) to 3.85% in the May monetary policy meeting.
Considering a strong rebound in Australian inflation despite stagnant retail demand, higher interest rates, and anticipation of weak economic prospects as cited by RBA policymakers earlier, a hawkish interest rate stance is expected from RBA Governor Philip Lowe in June’s monetary policy meeting next week.
Meanwhile, weak Chinese factory activity for May is also weighing pressure on the Australian Dollar. China’s National Bureau of Statistics (NBS) has reported Manufacturing PMI at 48.8, lower than the estimates of 49.4 and the former release of 49.2. While Non-Manufacturing PMI jumped to 54.5 from the consensus of 50.7 but remained lower than the former figure of 56.4. It is worth noting that Australia is the leading trading partner of China and weak manufacturing activities in China impact the Australian Dollar.
The Japanese Yen has got some strength after Bank of Japan (BoJ) Governor Kazuo Ueda’s commentary. BoJ Ueda cited that an increase in inflationary pressures have been caused by supply factors such as a rapid rise in commodity prices, labor shortages, and disruptions to supply chains. On Tuesday, BoJ Ueda stated that the central bank will continue its bond-buying operations to keep inflation steadily above 2%.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.