• AUD/JPY is juggling in a minute range, upside looks likely as odds of RBA-BOJ policy divergence soars.
• The release of higher Australian Inflation print has accelerated RBA’s rate hike expectations.
• This week, the entire focus will remain on Japan’s labor market data.

The AUD/JPY pair is displaying back and forth moves in a narrow range of 95.40-95.57 in the early Tokyo session. The asset has witnessed a mild correction after attempting a break above 95.70. However, the cross has managed to establish comfortably above the crucial hurdle of 95.35 amid a soaring market mood.

The risk barometer is looking to extend its gains as investors are expecting an escalation in the Reserve Bank of Australia (RBA)-Bank of Japan (BOJ) policy divergence. A higher inflation print posted by the Australian Bureau of Statistics on Wednesday has paddled up the odds of one more new normal 50 basis points (bps) rate hike announcement by the RBA.

The Australian Bureau of Statistics reported the overall inflation rate for the second quarter of CY2022 at 6.1%, minutely lower than the estimates of 6.2% but remained extremely higher than the prior release of 5.1%. Also, the trimmed CPI has increased to 4.9%, higher than the expectations and the prior release of 4.7% and 3.7% respectively.

There is no denying the fact that RBA Governor Philip Lowe will go for more policy tightening measures in August monetary policy to contain the inflationary pressures. However, the Bank of Japan (BOJ) will carry forward its ultra-loose monetary policy as pre-pandemic levels are yet to be achieved.

Going forward, investors’ focus will remain on Japan’s employment data. The jobless rate may trim to 2.5% vs. the prior release of 2.6%. Also, the Jobs/Applicants ratio may increase to 1.25 from the former figure of 1.24. An occurrence of the same will strengthen the yen bulls.