AUD/JPY advances towards 97.00 on widened RBA-BOJ policy divergence, Aussie GDP eyed

• AUD/JPY is eyeing a fresh seven-year high at 97.00 as RBA-BOJ policy divergence widens.
• Investors should brace for upbeat Australian GDP data ahead.
• A decline in households’ consumption indicates a loss of consumer confidence in the Japanese economy.

The AUD/JPY pair is aiming to refresh its seven-year high at around 97.00 as a rate hike announcement by the Reserve Bank of Australia (RBA) on Tuesday has widened RBA-Bank of Japan (BOJ) policy divergence. On one side, where the Australian Economy is facing the headwinds of soaring price pressures, the Japanese economy is struggling to elevate the inflation rate led by a slowdown in the overall demand.

On Tuesday, RBA Governor Philip Lowe announced a fourth consecutive rate hike by 50 basis points (bps). Australia’s Official Cash Rate (OCR) now stands at 2.35%. As price pressures have been recorded at 6.1% for the second quarter of CY2022, a spree of rate hikes is highly expected by the RBA. Adding to that, the Australian inflation rate has not revealed signs of exhaustion yet.

Brace for an upbeat Australian GDP data

In today’s session, investors’ entire focus will remain on the Australian Gross Domestic Product (GDP) data. The Australian economy is expected to grow by 1% on a quarterly basis vs. 0.8% recorded in the prior quarter. Also, the yearly data is expected to improve to 3.5% vs. the 3.3% recorded earlier. An occurrence of the same will strengthen the aussie bulls further.

A decline in households’ consumption may restrict the inflation rate

Meanwhile, yen bulls are worried over a decline in the consumption of Japanese households. The Overall Household Spending data released on Tuesday is indicating a decent drop in the households’ demand. The economic data landed at 3.4%, lower than the expectations of 4.2% and the prior release of 3.5%. This indicates households’ pessimism in the Japanese economy and also lower expenditure by the former may restrict the inflation rate.