Tokyo/Sydney – The AUD/JPY pair hovers around 103.70 during European trading hours on Friday, with the Australian Dollar (AUD) continuing its downward trend. Recent mixed economic data from China, a major trading partner for Australia, is weighing on the Aussie, while the Japanese Yen (JPY) faces renewed pressure from the Bank of Japan‘s (BoJ) continued easing stance.
China’s April retail sales figures, released earlier today, showed a slower-than-expected growth of 2.3% year-on-year, down from March’s 3.1% and the anticipated 3.8%. While marking the 15th consecutive month of growth in retail activity, the slowdown indicates a potential weakening in consumer spending. Conversely, China’s industrial production surged 6.7% year-on-year, exceeding both the projected 5.5% and the previous month’s 4.5%, suggesting robust manufacturing activity. This mixed bag of data leaves investors questioning the trajectory of the Chinese economy and its impact on the Australian market.
Adding to the AUD’s woes are recent Australian employment figures released on Thursday. While the Wage Price Index (QoQ) showed a 0.8% increase in the first quarter, it fell short of the expected 0.9% rise, marking the smallest quarterly increase since late 2022. Annual pay growth also slowed slightly to 4.1%, down from the previous 4.2% and below market expectations. These figures indicate a possible slowdown in Australia’s labor market, adding to concerns about the country’s economic outlook.
Meanwhile, the JPY faces pressure from the BoJ’s continued easing policy. Despite speculation of a surprise cut to debt purchasing earlier in the week, the central bank maintained its bond-buying amounts on Friday. Traders anticipate the BoJ may reduce bond buying at the June policy meeting. BOJ Governor Kazuo Ueda has also confirmed that there are no immediate plans to sell the central bank’s ETF holdings.
However, former BOJ chief economist Toshitaka Sekine, in an interview with Bloomberg, suggested that the BoJ could raise its benchmark interest rate up to three more times this year, potentially as early as June. Sekine argued that the BoJ has ample room to adjust its current “excessively” easy settings.
With conflicting signals from both Australia and Japan, the AUD/JPY pair is likely to remain volatile in the coming days. The market will be closely watching for further economic indicators from both countries, as well as the upcoming June policy meetings of the BoJ and the Reserve Bank of Australia, for insights into future monetary policy directions.
