AUD/JPY edges lower on Monday after the release of the lower-than-expected Aussie <wbr>Retail Sales, a leading indicator that has a direct correlation with inflation and growth prospects, could impact the RBA’s hawkish stance on interest rate trajectory. However, the Australian Dollar (AUD) strengthened as higher-than-expected domestic inflation data raised expectations that the Reserve Bank of Australia (RBA) may not cut interest rates soon.
Australia's largest mortgage lender, Commonwealth Bank has adjusted its forecast for the timing of the first interest rate cut by the RBA. They are now projecting only one cut in November, as reported by the Financial Review. CBA anticipates that the Reserve Bank of Australia' could decrease the cash rate to 4.1% from 4.35% this year, with a more substantial drop to 3.1% by 2025. Gareth Aird, CBA's head of Australian economics, stated, "We have penciled in one 25 basis point rate cut in each quarter over 2025."
On the Japanese side, market participants will remain vigilant for potential Japanese intervention on Tuesday, following reports of Tokyo's involvement in the currency market on Monday, which propelled the Japanese Yen (JPY), according to Reuters. Lower-than-expected domestic Retail Trade data released on Tuesday support the dovish stance of the Bank of Japan (BOJ). Additionally, expectations for a sustained significant interest rate differential between Japan and other nations suggest that the trajectory of the JPY is biased toward further depreciation.
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