AUD/JPY steadies around 94.60 ahead of BOJ’s policy

• AUD/JPY is oscillating around 94.60 as investors are shifting their focus to BOJ’s interest rate policy.
• Hawkish RBA in times of weak labor market has weakened the aussie bulls.
• Japan’s upbeat GDP has supported the yen bulls.

The AUD/JPY pair is displaying topsy-turvy moves in a narrow range of 94.32-94.91 from Friday. The risk barometer has turned sideways after a sheer downside falls from 96.88 recorded last week. The aussie bulls got hammered last week after the Reserve Bank of Australia (RBA) dictated an extreme hawkish stance while the Japanese economy reported better-than-expected Gross Domestic Product (GDP) numbers.

The RBA announced an Official Cash Rate (OCR) hike by 50 basis points (bps). RBA Governor Philip Lowe went out of the box and dictated a rate hike higher than the estimates of 25 bps. Investors were not satisfied with featuring a jumbo rate hike despite the unfavorable labor market. The aussie labor market has failed to generate plenty of job opportunities in the last few months.

For May, the Australian economy generated 4k jobs, significantly lower than the estimates of 30k. More liquidity shrinkage from the economy will dampen the labor market further.

On the Tokyo front, the Japanese Cabinet office reported better-than-expected GDP numbers that supported the yen bulls. The quarterly GDP improved to -0.1% from the estimates of -0.3% while the annual GDP climbed to -0.5% from the consensus of -1%.

Going forward, investors’ focus will remain on the interest rate decision by the Bank of Japan (BOJ), which is due on Friday. The BOJ is expected to keep the interest rates unchanged at -0.1% despite the inflation levels having reached above the target of 2%. It is worth noting that the major contribution to the higher inflation rate is the rising oil prices. Therefore, a prudent monetary policy will continue a little longer.