Ella 
The AUD/JPY cross snapped a two-day losing streak during Monday’s Asian session. The pair is currently trading around 94.51, up 0.17% on the day. The Reserve Bank of Australia (RBA) will hold monetary policy meetings on Tuesday and Wednesday and release gross domestic product (GDP), which could trigger market volatility.
Australia’s Labor government is due to introduce legislation on Monday to close “loopholes” in workplace laws, facing opposition from business groups fearing higher costs. This in turn could encourage employers to pay more and push inflation higher.
Regarding data, the latest data from the University of Melbourne shows that Australia’s TD Securities inflation rate surged by 6.1% on an annual basis in August, compared with 5.4% in the previous month. The monthly data rose 0.2% from 0.8% in the previous month.
The Reserve Bank of Australia is expected to keep its key interest rate unchanged at 4.10% at its meeting on Tuesday as inflation shows signs of easing, a Reuters poll showed. However, market participants expect the central bank to maintain its hawkish stance and may raise interest rates further later this year.
On the other hand, Japan’s August monetary base data showed a year-on-year increase of 1.2%, compared with a 1.3% decline in the previous month. Japanese Finance Minister Shunichi Suzuki said on Friday that while sudden movements in the currency are undesirable, there are currently no clear signs of intervening in markets to support a weakening yen. However, the policymaker will keep a close eye on currency trends, Reuters reported. The Bank of Japan (BOJ) maintains loose monetary policy while no longer controlling the yield curve. Bank of Japan board member Toyoaki Nakamura said last week that policymakers need more time to transition to monetary tightening. Still, the monetary policy gap between Australia and Japan is a factor behind the yen’s weakness.
In the absence of top economic data from Japan, the AUD/JPY cross continues to be dominated by AUD price dynamics. The key event this week is the Reserve Bank of Australia’s (RBA) interest rate decision. Additionally, Australia’s second-quarter gross domestic product (GDP) will be released on Wednesday. Traders will look for trading opportunities on the AUD/JPY cross from this data.
