• AUD/JPY climbs to near 92.40 amid a sharp increase in Australian inflation.
• Annual Australian inflation has jumped to 7.8% while quarterly inflation has climbed to 1.9%.
• Rising interest rates by the RBA have contracted the scale of economic activities significantly.

The AUD/JPY pair has jumped to near 92.40 as the Australian Bureau of Statistics has reported a higher-than-anticipated Consumer Price Index (CPI) report for the fourth quarter of CY2022. The annual CPI has jumped to 7.8% from the expectations of 7.5% and the prior release of 7.3%. On a quarterly basis, the inflation rate has climbed to 1.9% vs. the consensus of 1.6% and the former release of 1.8%.

A higher-than-expected inflation rate is going to compel the Reserve Bank of Australia (RBA) for hiking interest rates further in its February monetary policy meeting. The Australian Financial Review’s survey of 34 economists put the first post-pandemic-era rate cut in play by March 2024. But before that, it expects RBA Governor Philip Lowe to continue hiking interest rates further to 3.60%. The RBA is expected to hike its Official Cash Rate (OCR) by 25 basis points (bps) in February and June.

Meanwhile, economic activities in the Australian region have been constantly contracting for the past seven months due to restrictive monetary policy. According to the preliminary S&P PMI (Jan), Australian Manufacturing PMI has trimmed consecutively for the seven-month to 49.8 while the street was expecting an expansion to 50.3. Also, the Services PMI has dropped vigorously to 48.3 from the consensus of 49.7, released on Tuesday.

On the Tokyo front, the Japanese Yen bulls are continuously facing pressure from the market participants after Bank of Japan (BoJ) Governor Haruhiko Kuroda kept a dovish stance on interest rates and also kept the range of Japanese Government Bonds (JGBs) unchanged. This week, the release of The Tokyo inflation data will be of utmost importance.