AUDJPY accelerates to 94.00 post RBA minutes release and Japan’s GDP contraction

• AUDJPY has climbed to near 94.00 after detailed clarification of a 25 bps rate hike by the RBA.
• A significant contraction in Japan’s economic activities has impacted the Japanese yen.
• The RBA has elevated its inflation guidance to 8.0% after a decent surge in the third quarter.

The AUDJPY pair has advanced sharply to near 94.00 after retreating from the critical support of 93.00 in the Tokyo session. The cross has picked bids after the release of the rationale behind the announcement of the second consecutive 25 basis points (bps) rate hike by the Reserve Bank of Australia (RBA). Also, a contraction in Japan’s economic activities in the third quarter has weighed pressure on the Japanese yen.

As per the RBA minutes, the chances for a 25 bps rate hike despite a historic surge in the inflation rate to 7.3% stood at 75%. The board agreed that acting consistently would support confidence in the monetary policy framework among financial market participants and the community more broadly. Also, RBA policymakers believed that the Official Cash Rate (OCR) has been elevated materially in a short span of time.

This has weighed heavily on households’ consumption. Higher interest rates and price pressures have impacted households’ budgets despite falling housing prices due to higher interest obligations. After a rise in inflationary pressures above 7.0%, the RBA has elevated its inflation guidance to 8.0%.

Meanwhile, investors are punishing the Japanese yen broadly on releasing a contraction in economic activities for the third quarter. The Japanese economy has displayed a de-growth of 0.3% in the third quarter against expectations of a growth rate of 0.3% and the prior release of 0.9%. On an annualized basis, the economic catalyst has displayed a negative growth rate at 1.2% against an expansion of 1.1% as expected and the prior release of 3.5%.