AUD/JPY maintains position above 98.00 after disappointing Chinese data

• AUD/JPY remains stronger amid diminishing odds of further RBA rate cuts.
• China’s Retail Sales climbed 3.4% YoY in August, against 3.8% expected and 3.7% in July.
• Traders weigh the BoJ policy path against mixed economic signals and ongoing political uncertainty.

AUD/JPY continues its winning streak for the fourth successive session, trading around 98.20 during the Asian hours on Monday. The currency cross holds gains as the Australian Dollar (AUD) maintains its position against its peers despite the weaker-than-expected economic data from Australia’s close trading partner, China. Japanese markets will be closed due to Respect-for-the-Aged Day bank holiday.

China’s Retail Sales rose 3.4% year-over-year (YoY) in August vs. 3.8% expected and 3.7% in July. Chinese Industrial Production increased 5.2% YoY in the same period, compared to the 5.8% forecast and 5.7% seen previously.

The National Bureau of Statistics (NBS) said during its press conference on Monday that economic operation was generally steady in August, but domestic demand will expand and promote a rebound in prices. Some firms are having difficulties in operations as the external environment is very severe, NBS added.

The AUD is supported by fading expectations of additional Reserve Bank of Australia (RBA) rate cuts, with swaps now pricing an 86% probability of policy remaining unchanged in September, underpinned by a robust July trade surplus, strong Q2 GDP, and hotter July inflation.

The AUD/JPY cross faced challenges as the Japanese Yen (JPY) struggles, as traders continue to assess the Bank of Japan’s (BoJ) policy outlook amid mixed economic signals and political uncertainty. Market participants expect that the successor of the Japanese Prime Minister Shigeru Ishiba might put pressure on the BoJ to keep interest rates low.

Prime Minister Ishiba has announced his resignation, citing growing pressure following last year’s election loss and escalating divisions within the ruling party. His resignation adds a layer of uncertainty, which could temporarily hinder the BoJ from normalizing policy.