AUD/JPY oversteps 95.60 ahead of RBA’s interest rate decision

• AUD/JPY has given a breakout of the 95.50-95.60 range on the expectation of a hawkish stance by the RBA.
• A fourth consecutive 50 bps rate hike by the RBA will step up the OCR to 2.35%.
• Lower spending by Japanese households indicates lower consumer confidence in the economy.

The AUD/JPY pair has witnessed an upside break of the rangebound auction formed in a narrow territory of 95.50-95.60 in the early Tokyo session. The asset is aiming to recapture the immediate hurdle of 96.00 as the Reserve Bank of Australia (RBA) is expected to continue its ‘hawkish’ stance on interest rates. This may deepen the RBA-Bank of Japan (BOJ) policy further.

As per the estimates, RBA Governor Philip Lowe will announce a fourth consecutive 50 basis points (bps) interest rate hike. This may step up the Official Cash Rate (OCR) to 2.35%. Price pressures in the Australian economy have not displayed any sign of exhaustion yet. Therefore, the RBA is bound to keep up the hiking momentum to combat the soaring inflation. The Australian inflation rate has been recorded at 6.1% for the second quarter of CY2022.

This week, investors will also focus on the Australian Gross Domestic Product (GDP) numbers. The Australian economy is expected to grow by 1% on a quarterly basis vs. 0.8% recorded in the prior quarter. Solid GDP data will strengthen the aussie bulls further.

On the Tokyo front, the release of the Overall Households Spending data has not much influenced the yen bulls. The economic data has 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.