AUD/JPY surges above 96.00 as RBA raises interest rates by 50 bps to 0.85%

• AUD/JPY has climbed above 96.00 on an extreme hawkish tone adopted by the RBA.
• The RBA has hiked its OCR by 50 bps to 0.85% vs. the forecasts of 25 bps.
• Japan’s economy will report the GDP numbers this week.

The AUD/JPY pair has firmly moved above 96.00 as the Reserve Bank of Australia (RBA) has dictated an extreme hawkish stance on interest rates. The RBA has elevated its interest rates by 50 basis points (bps). Officially, the Official Cash Rate (OCR) has increased to 0.85%.

A rate hike was highly expected as mounting price pressures in the Australian economy could be contained by deploying strict quantitative measures only. As per the market consensus, a rate hike by 25 bps was expected from the RBA, however, a half-of-a-percent rate hike has infused an adrenaline rush into the aussie bulls.

The Australian Bureau of Statistics reported the annual inflation rate at 5.1% for the first quarter of Calendar Year (CY) 2022. Also, the Australian economy added only 4k jobs in April vs. the forecast of 30k. Therefore, the market participants were considering a 25 bps rate hike only as a tight monetary policy could dampen the Australian labor market. Now, a rate hike by 50 bps may add vulnerability to the labor market.

It is worth noting that the RBA also elevated its interest rates by 25 bps for the first time in May since the pandemic of the Covid-19.

Meanwhile, the continuation of an ultra-loose monetary policy by the Bank OF Japan (BOJ) will keep haunting the yen bulls. This week, investors’ focus will remain on the Gross Domestic Product (GDP) numbers, which are due on Wednesday. The annualized GDP is seen as stable at -1%, however, the quarterly GDP could tumble to -0.3% against the prior print of -0.2%.