• AUD/JPY is looking to re-test the 10-day high around 92.00 as the focus has shifted to Australian Employment.
• The stubborn labor cost index could keep the overall demand elevated and eventually the Australian inflation.
• Japan’s economy is likely to continue moderate pickup ahead due to wage hikes, and a strong corporate appetite for investment.

The AUD/JPY pair is looking to reclaim the 10-day high around 92.00 in the early Tokyo session. The risk barometer showed a significant jump on Wednesday as investors are worried that the Reserve Bank of Australia (RBA) could raise interest rates further to tame Australian inflation.

On Wednesday, the Australian Bureau of Statistics reported mixed Q1 Wage Price Index data. The quarterly labor cost index remained steady at 0.8% but lower than the estimate of 0.9%. On an annual basis, the economic data accelerated to 3.7% vs. the consensus of 3.6% and the former release of 3.3%. A stubborn labor cost index could keep the overall demand elevated and eventually, the Australian inflation, which could force RBA Governor Philip Lowe to tighten monetary policy further.

Going forward, Australia’s Employment data (April) will provide more clarity. As per the consensus, the Australian economy added 25K fresh jobs in April, lower than the additions of 53K made in March. The Unemployment Rate is seen unchanged at 3.8%. Lower additions of fresh payrolls would be a comfort for the agenda of bringing inflation down ahead.

Economists at Commerzbank believe that “The main risk remains that the labor market data might surprise to the upside. A surprise of that nature would further fuel recent hopes of a further rate step and would no doubt be positive for the Aussie.”

On the Japanese Yen front, Japan’s Gross Domestic Product (GDP) showed a decent rise in Q1 numbers. Preliminary Q1 GDP accelerated by 0.4% vs. the estimates of 0.1%. In the last quarter, the GDP growth remained stagnant. Japan’s Economy Minister Shigeyuki Goto cited “Economy likely to continue moderate pickup ahead due to improving sentiment, wage hikes and strong corporate appetite for investment.