AUD/JPY reverses gains sharply from 94.80, Australian inflation climbs to 7.3%

• AUD/JPY has surrendered its sheer move to 94.78 amid Australia’s steeper inflation impact.
• Australia’s headline CPI has touched a high of 7.3% vs. expectations of 7.0%.
• Going forward, BOJ’s monetary policy will be the key trigger.

The AUD/JPY pair has reversed its sharp move to an intraday high of 94.78 and has resulted in a selling tail in the Tokyo session after better-than-projected Australian Consumer Price Index (CPI) data.

The Australian Bureau of Statistics has reported the headline Consumer Price Index (CPI) for the third quarter of CY2022 at 7.3%, higher than the expectations of 7.0% and the prior release of 6.1% on an annual basis. Also, the quarterly inflation rate has landed in line with the former print of 1.8% and higher than the projections of 1.5%.

It is worth noting that the inflation rate has crossed the RBA’s projection of 7.0% provided in September’s monetary policy meeting. This has triggered a risk of further decline in economic projections as the Reserve Bank of Australia (RBA) will be required to return to its earlier 50 basis points (bps) rate hike spell.

In its October monetary policy meeting, RBA Governor Philip Lowe trimmed the extent of the rate hike to 25 bps in order to keep the spirits of economic prospects along with the fight against soaring inflationary pressures.

Meanwhile, the cross is still far from the knee-jerk reaction recorded on Monday at around 95.44. The suspected Bank of Japan (BOJ)’s intervention in the currency markets against disorderly moves impacting the Japanese yen has kept the market participants on the sidelines.

This week, the major event will be BOJ’s interest rate decision, which is due on Friday. Considering the demand shocks from the global economy, BOJ Governor Haruhiko Kuroda may prefer to continue a loose monetary policy.