The cross climbs amid Japan’s inflation pressures and tax cut plans, while BoJ rate hike expectations for September surge to 80%.
The AUD/JPY pair advanced to 113.40 in early European trading, driven by a weaker Japanese Yen. Mounting fiscal concerns and persistent inflation in Japan, alongside proposed tax cuts, have weighed on the JPY.
Markets are also pricing in an 80% chance of a Bank of Japan rate hike in September, up sharply from prior expectations. Meanwhile, Fed rate hike bets have declined, further supporting the AUD/JPY cross. Traders await Australia’s upcoming jobs data for further direction.
Japan’s economy faces additional pressure from elevated energy costs, compounding the Yen’s struggles. The BoJ’s potential policy shift contrasts with fading Fed tightening expectations, reshaping relative monetary policy outlooks.