AUD/JPY sees a subdued performance on light estimates for Caixin Manufacturing PMI

• AUD/JPY is expected to remain sideways with a weaker bias ahead of Caixin Manufacturing PMI.
• The RBA is expected to elevate its OCR by 50 basis points on Tuesday.
• To keep the inflation rate above 2%, the BOJ is needed to elevate wage rates.

The AUD/JPY pair is likely to display a subdued performance in the Asian session as investors are awaiting the release of China’s Caixin Manufacturing data, which is seen slightly lower at 51.5 from the prior release of 51.7. It is worth noting that Australia is a leading trading partner of China and a slump in Chinese manufacturing activities will affect the antipodean.

This week, the show stopper event will be the interest rate decision by the Reserve Bank of Australia (RBA). RBA Governor Philip Lowe is likely to elevate its Official Cash Rate (OCR) by 50 basis points (bps). It is worth noting that the half-a-percent rate hike will be the third consecutive rate hike by the RBA to a similar extent.

Price pressures are soaring in the Australian economy as oil and food items have remained volatile heavily. The inflation rate has jumped to 6.1% for the second quarter of CY2022 against the prior release of 5.1%. To tame the price pressures, interest rate hikes are imminent. Till now, the RBA has elevated its OCR to 1.35%.

On the Tokyo front, the Japanese yen has displayed a broader strength, which is mainly a corrective move as fundamentals have not changed yet. Bank of Japan (BOJ) Governor Haruhiko Kuroda is worried over lower wage rate elevation as it is critical to keep the inflation rate above 2%. The BOJ’s ultra-loose monetary policy is to keep flushing funds into the economy in order to spurt the growth rate as the economy has yet not met with pre-pandemic growth levels.