AUD/JPY retreats from 89.00 as investors eye RBA Lowe’s speech

• AUD/JPY has faced resistance after a pullback move to near 89.00.
• The RBA kept rates steady at 3.60% amid the quick softening of Australia’s inflation this year.
• Higher oil prices are likely to put a burden on Japanese households.

The AUD/JPY pair has retreated after a short-lived pullback to near 89.00 in the early Asian session. The risk barometer is expected to show significant volatility as Reserve Bank of Australia (RBA) Governor Philip Lowe would put some light on the steady interest rate decision taken on Tuesday.

After 10 consecutive interest rate hikes and three consecutive 25 basis points (bps) rate escalations, RBA kept the interest rate policy unchanged on Tuesday. The rationale behind keeping rates steady at 3.60% is the quick softening of Australia’s inflation this year.

Australia’s monthly Consumer Price Index (CPI) indicator has shown a decline in the inflation peak recorded at 8.4% in December to 6.8% in February. This infused confidence in RBA policymakers that the monetary policy is restrictive enough to tame inflation further.

RBA policymakers are anticipating that the Australian economy is slowing ahead, which will cool down the tight labor market. This would result in a lower offering of funds for hiring talent and the stubborn inflation would soften further. The speech from RBA Lowe would provide more clarity about the mindset of the central bank on the maintenance of the status quo and further guidance on interest rates.

On Thursday, the release of the Australian Financial Stability Review report will be released, which will provide a detailed explanation of the financial conditions of the economy and any risk associated with commercial banks due to higher interest rates.

On the Japanese Yen front, higher oil prices are likely to put a burden on households. The Bank of Japan (BoJ) and the administration are constantly working on raising wages to push demand, however, the efforts would go in vain if extra wages would get utilized in offsetting the impact of costly oil.