AUD/JPY Gains Ground Amidst Political Instability in Japan
- Japan’s Producer Price Index (PPI) Sees Growth
- Australian PM Discusses Trade Relations with US President-elect
The AUD/JPY pair has been on an upward trend for the past three days, currently trading around 101.20 during European hours on Wednesday. This increase can be attributed to a weakened Japanese Yen (JPY) as uncertainties surround future rate hikes by the Bank of Japan (BoJ) due to Japan’s fragile minority government.
Japan’s Producer Price Index (PPI) Data
The BoJ’s preliminary report for October revealed that Japan’s PPI rose by 3.4% year-over-year, exceeding expectations and previous readings. Additionally, the PPI saw a 0.2% increase month-over-month, surpassing anticipated flat growth.
Australian Dollar (AUD) Strengthens
The Australian Dollar received a boost following Australian PM Anthony Albanese’s discussion on trade relations with US President-elect Donald Trump. Albanese emphasized the importance of maintaining fair trade with Australia, highlighting the trade surplus the US holds with the country.
Australia’s Wage Price Index Data
On the data front, Australia’s Wage Price Index showed a 3.5% year-over-year increase in the third quarter, slightly below expectations and representing the slowest wage growth since Q4 2022. The quarterly index remained steady at 0.8% in Q3, just under the anticipated 0.9%.
Central Banks FAQs
Central banks play a crucial role in maintaining price stability within a country or region, ensuring inflation remains in check. The US Federal Reserve (Fed), European Central Bank (ECB), and Bank of England (BoE) aim to keep inflation close to 2%.
A central bank’s key tool for managing inflation is its benchmark policy rate, which influences savings and lending rates. Monetary tightening involves raising interest rates, while monetary easing involves cutting rates to stimulate the economy.
Central banks operate independently and comprise policymakers with varying views on monetary policy. Doves advocate for loose monetary policy to boost the economy, while hawks prioritize controlling inflation by raising rates.
Central bank meetings are led by a chairman or president who strives to create consensus among policymakers. Speeches and communication with markets aim to convey the bank’s monetary stance without causing market volatility. A blackout period restricts policymakers from public communication leading up to policy meetings.