Key Moments
- AUD/JPY traded around 111.30 during Asian hours on Wednesday, extending its winning streak to a fourth session.
- Australia’s annual CPI reached 4.3% in September, exceeding both August’s 4.0% and the 4.2% market forecast, and remaining above the RBA’s 2-3% target band.
- Market-implied odds of a November Reserve Bank of Australia rate increase rose to 78% from 70% after the inflation release.
Australian Inflation Upside Surprise Lifts AUD/JPY
AUD/JPY continued its upward momentum for a fourth consecutive day, trading near 111.30 during Wednesday’s Asian session. The cross drew support from a stronger Australian Dollar following the latest domestic Consumer Price Index data.
Headline CPI in Australia increased 4.3% year-over-year in September, compared with 4.0% in August and slightly above consensus expectations of 4.2%. On a month-over-month basis, consumer prices rose 0.8%, accelerating from a 0.4% gain previously and surpassing forecasts of 0.7%.
The Trimmed Mean CPI, a closely watched gauge of underlying price pressures, advanced 0.3% on the month and 3.7% on an annual basis.
| Australia Inflation Metrics | Latest Reading | Previous | Forecast |
|---|---|---|---|
| Headline CPI (YoY, September) | 4.3% | 4.0% | 4.2% |
| Headline CPI (MoM) | 0.8% | 0.4% | 0.7% |
| Trimmed Mean CPI (MoM) | 0.3% | – | – |
| Trimmed Mean CPI (YoY) | 3.7% | – | – |
The higher-than-expected figures pushed inflation further beyond the Reserve Bank of Australia’s 2-3% objective, reinforcing expectations that policymakers may tighten policy at the November 3 meeting. In interest-rate markets, the probability of a November hike climbed to 78%, up from 70% before the data.
RBA Governor Bullock stated that inflation remains far too high and highlighted that overall demand still exceeds supply, while refraining from providing specific guidance on the upcoming policy decision.
Yen Under Pressure as Oil Advances
The Japanese Yen weakened against major counterparts as rising crude oil prices weighed on energy-importing economies such as Japan. Oil markets moved higher as investors monitored ongoing election results in Israel that could influence the trajectory of the Middle East conflict.
Exit polls pointed to a closely fought contest, indicating Prime Minister Benjamin Netanyahu was level with opposition leader Gadi Eisenkot, with neither side yet securing a decisive majority as vote counting continued. Early indications suggested waning backing for Netanyahu, who has played a central role in Israeli politics while overseeing nearly three years of conflict.
Central Bank Meetings in Focus
Looking ahead, market participants are closely tracking key central bank meetings scheduled for this week. Both the Federal Reserve and the Bank of Japan are widely expected to leave interest rates unchanged, while investors assess the chances of potential adjustments in December.
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