AUD/JPY tumbles below 95.00 as Australian Inflation releases higher at 6.1%

• AUD/JPY has surrendered the cushion of 95.00 after upbeat Australian CPI data.
• The overall inflation rate has landed at 6.1%, and the RBA trimmed mean CPI is been recorded at 4.9%.
• This week, Australian Retail Sales and Japan’s employment data will be of utmost importance.

The AUD/JPY pair has surrendered the majority of its intraday gains and has slipped sharply below 95.00 after the release of the Australian Consumer Price index (CPI) data for the second quarter of CY2022. The overall inflation rate has landed at 6.1%, minutely lower than the estimates of 6.2% but remained extremely higher than the prior release of 5.1%. Also, the trimmed CPI has increased to 4.9%, higher than the expectations and the prior release of 4.7% and 3.7% respectively.

This has accelerated the odds of a consecutive 50 basis points (bps) interest rate hike by the Reserve Bank of Australia (RBA). The RBA has stepped up its Official Cash Rate (OCR) to 1.35% in its previous three monetary policy meetings. A back-to-back OCR hike by 50 bps has failed to drag the inflation rate. In the first week of August, odds are higher that RBA Governor will dictate one more rate hike to contain price pressures.

Going forward, the Aussie Retail Sales data will remain in focus. A preliminary estimate for the economic data is 0.5%, lower than the prior release of 0.9%. In times, when higher energy bills and costly food products are driving Retail Sales in major economies, a slippage in the economic data may have vulnerable consequences. Retail Sales should be higher led by soaring price pressures, however, the downbeat retail sales indicate a sheer fall in the overall demand. This may drag the economy into recession.

On the Tokyo front, investors are awaiting the release of the employment data, which is due on Friday. The jobless rate may trim to 2.5% vs. the prior release of 2.6%. Also, the Jobs/Applicants ratio may increase to 1.25 from the former figure of 1.24. An occurrence of the same will strengthen the yen bulls.