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AUD/JPY Disregards Australia's Better-Than-Expected Q2 GDP To Decline To 94.00 Amid Negative Sentiment
AUD/JPY remains depressed amidst a risk-averse sentiment and disregards optimistic Australian growth data. The Q2 GDP of Australia exceeded market expectations by 0.4% QoQ and 2.1% YoY. The JPY depreciates amidst fears of a Japanese intervention, a China slowdown, and conflicting concerns regarding Australia. The RBA Governor Lowe's Speech, fears of Japanese interference, and China-related news should be closely monitored for new impetus.
AUD/JPY remains under pressure for a second consecutive day as sellers assault the 94.00 round number despite upbeat Australian economic growth data released early Wednesday. In doing so, the cross-currency pair justifies its status as a risk barometer amidst China-related concerns.
Australia's second quarter (Q2) Gross Domestic Product (GDP) increased to 0.4% QoQ compared to 0.3% expected and 0.20% prior readings, but the annual figures decreased to 2.1% YoY from 2.3% prior readings and analysts' predictions of 1.5%.
Notably, US 10-year Treasury bond yields remain firmer around 4.27% after increasing eight basis points (bps) to 4.22% the day before, which should have supported the AUD/JPY pair. Nevertheless, concerns regarding China and the Reserve Bank of Australia's (RBA) dovish pause exert downward pressure on the pair.
However, concerns about China's economic decline and the US economy's soft landing shook investor sentiment and fueled the Greenback. In August, China's Caixin Services Purchasing Managers' Index (PMI) fell to its lowest level of the year, from 54.1 to 51.8. Dr. Wang Zhe, Senior Economist at Caixin Insight Group, explained that the indicators for business activity and total new business remained above 50 for the eighth consecutive month, albeit at lower levels than in July.
The cross-currency pair was weighed down by the market's lack of confidence in the Chinese measures to defend the economy, as well as the recent Sino-American tensions over Taiwan and the disquiet of US businesses in Beijing.
In doing so, the quote disregards China's recently declared quantitative and qualitative measures to protect the economy from losing its post-COVID-19 recovery. On the same line was information suggesting that China's largest reality television producer, Country Garden, could avoid bankruptcy.
Earlier in the day, Australian Treasurer Jim Chalmers expressed concerns about a substantial economic downturn as a result of China's economic slowdown and rising interest rates. As a result of US Treasury Secretary Gina Raimono's defence of Beijing's current tariffs, the AUD/JPY bears remain optimistic.
Fears of Japan's intervention to defend the Yen, after the Japanese currency reached its yearly low against the US Dollar, appear to have also weighed on the AUD/JPY exchange rate.
Tracking Wall Street's gloomy closing price, S&P500 Futures reflect the prevailing gloom.
Moving forward, RBA Governor Lowe's final speech before resigning will be crucial to monitor for clear direction, as any indications of a policy reversal could push the Australian dollar further south.
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