AUD/JPY recaptures 92.00 on upbeat Australian PMI data

• AUD/JPY is attempting to extend its gains above 92.00 on higher-than-expected Australian PMI data.
• Aussie’s S&P Global Services PMI has improved to 50.9 vs. 50.4 the prior release.
• The rate hike announcement by the RBA has escalated RBA-BOJ policy divergence.

The AUD/JPY pair is attempting a rebound after a corrective move below 92.00 in the early Tokyo session. The risk barometer is upbeat on a broader note, therefore, the upside will remain favored. The asset is expected to catch bids as the IHS Markit has reported higher-than-expected S&P Global Services and Composite PMI data.

The Services PMI has landed at 50.9, higher than the estimates and the prior release of 50.4. While the Composite PMI has improved to 51.1 from the former figure of 50.6. In times, when the odds of a recession and demand worries in China are accelerating, an improvement in Services PMI numbers will support the aussie bulls.

On Tuesday, the asset rebounded firmly after the Reserve Bank of Australia (RBA) announced a rate hike by 50 basis points (bps). RBA Governor Philip Lowe accelerated the Official Cash Rate (OCR) to 1.85% as their prime responsibility is to bring price stability to the economy. A third consecutive 50 bps rate hike by the RBA has escalated RBA-Bank of Japan (BOJ) policy divergence.

Meanwhile, the yen bulls are likely to return to the bears’ pool as the BOJ will continue with its ultra-loose policy stance on interest rates. The Japanese economy is struggling to push the inflation rate higher without the support of volatile oil and food product prices. To keep the inflation rate above 2%, a higher move in the Labor Cost Index is critical.