AUD/JPY remains on the defensive below the 93.80 mark following the Chinese inflation data

• AUD/JPY struggles to gain and currently trades around 93.77, losing 0.05% on the day.
• Chinese Consumer Price Index (CPI) YoY fell 0.3% (Jul) from 0% prior and -0.4% expected.
• Japanese policymakers support maintaining ultra-loose monetary policy.

The AUD/JPY cross remains on the defensive below the 94.00 mark during the early Asian session on Wednesday. The cross currently trades around 93.77, down 0.05% for the day. The Chinese inflation data fails to inspire the China-proxy Australian Dollar (AUD).

The latest data on Wednesday showed that the Chinese Consumer Price Index (CPI) YoY fell 0.3% in July from 0% prior, and the market consensus anticipated a -0.4% decline. Meanwhile, the Producer Price Index (PPI) declined 4.4% YoY, compared to the 4.1% decrease YoY expected and a 5.4% drop prior.

Earlier this week, China's trade balance increased to $80.6 billion, exceeding expectations of $70.6 billion and $70.62 billion prior. While, the dollar value of China’s exports YoY in July plunged -14.5%, worse than expectations of -12.5% in June, and Imports dropped -12.4% YoY from -5%.

On the Aussie front, Westpac Consumer Confidence in Australia fell to -0.4% in August, down from 2.7% the previous month. Meanwhile, the National Australia Bank's (NAB) Business Conditions for July increased to 10.0 from 9.0 prior, above the market consensus of 8.0. Lastly, the NAB Business Confidence increased to 2.0% from -1.0% estimations and 0.0% prior. That said, the mixed economic reading from Australia and China fails to inspire the Aussie.

In Japan, Household Spending YoY dropped from 4.0% to 4.2% in June, a fourth month of decline. Average Cash Earnings y/y came in at 2.3% from 2.9%, which was worse than the estimated 3.0%. Further detail revealed that households with two or more people spent an average of 275,545 yen ($1,900). This figure could raise concerns about the Bank of Japan's (BoJ) ultra-loose monetary policy.

Nevertheless, the Summary of Opinions released by the Bank of Japan on Monday revealed that the policymaker supports maintaining ultra-low interest rates until robust domestic demand and higher wages replace cost-push factors as the primary drivers of price increases and maintain sustainable inflation around its target.

Looking ahead, the Australian and Japanese dockets will not release top-tier data this week. However, market participants will take cues from the Japanese Producer Price Index (PPI) for July and the Australian Consumer Inflation Expectation for August, due on Thursday. The next week’s highlight will be the Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes. Traders will find opportunities around the AUD/JPY cross.