Next week’s foreign exchange market will focus on the BOJ policy meeting and the RBA governor’s parliamentary testimony, with AUD/JPY and NZD/JPY expected to remain soft under pressure from yen appreciation. New Zealand’s April–June GDP release is also expected to be a market driver.
Next week will bring two major events, the BOJ Monetary Policy Meeting and testimony before parliament by a senior Reserve Bank of Australia (RBA) official, and AUD/JPY and NZD/JPY are likely to be driven by yen movements. The market is almost certain that the BOJ will proceed with an additional 0.25% rate hike, and buying pressure on the yen is expected to cap gains across the yen crosses.
Ahead of RBA Governor Michele Bullock’s parliamentary testimony, the focus will be on whether she refers to upside risks to inflation. With expectations of an additional BOJ rate hike and pressure for yen appreciation pulling in opposite directions, rebounds in AUD/JPY and NZD/JPY are likely to remain limited.
New Zealand’s April–June GDP, due to be released on the 17th, will be the key focus for NZD/JPY. Against the backdrop of global inflation risks, including higher oil prices, a strong GDP result could heighten expectations of an additional RBNZ rate hike and support the New Zealand dollar.
The impact of the BOJ meeting and the FOMC is also expected to overlap next week. AUD/JPY is expected to trade in the low ¥109 range on the downside, while NZD/JPY is expected to remain around ¥93. The overall direction of the yen crosses is likely to be determined by the BOJ’s stance on rate hikes and movements in US interest rates.