- The AUD/JPY remains off in the middle of a low volume trade, since Australian markets remain closed by the Holy Friday holiday.
- The labor data of March of Australia have intensified the speculation about a possible cutting cuts of 25 basic points by the RBA in May.
- In Japan, the IPC “underlying-underground”, which excludes fresh food and energy, rose to 2.9% in March from 2.6% in February.
The AUD/JPY goes back its recent profits from the previous session, quoting around 90.80 during the European hours of Friday. The currency crossing remains under pressure as the Australian dollar (AUD) weakens in a low volume trade, with local markets closed by the Holy Friday holiday.
The minutes of the meeting of the Bank of the Australian Reserve (RBA) from March 31 to April 1 highlighted the uncertainty around at the time of the next movement of interest rates. While the Board considered that the May meeting was an appropriate time to reassess the policy, it emphasized that no previous decision had been made. The risks for both economic growth and inflation remain balanced up and down.
Australia’s labor data showed that the unemployment rate remained stable at 4.1%, but work profits did not meet expectations. This has fed speculation about a possible rate of 25 basic points in May, with some operators even considering a movement of 50 basic points amid increasing concerns about a global deceleration linked to tariff escalation.
In Japan, the National Consumer Price Index (CPI) rose 3.6% year -on -year in March, marking three consecutive years above the inflation target of 2% of the Bank of Japan (BOJ), although slightly below 3.7% in February. The “underlying-underground” CPI, which excludes fresh food and energy, accelerated 2.9%from 2.6%, while underlying inflation (excluding only fresh foods) rose to 3.2%, in line with forecasts.
These inflation readings arrive before the BOJ’s policy meeting of May 1, where the Central Bank is expected to maintain the rates at 0.5% and potentially check its growth perspective as the growing global commercial tensions weigh on the feeling.
US interest rates
Financial institutions charge interest rates on loans to borrowers and pay them as interest to savers and depositors. They influence the basic types of interest, which are set by central banks based on the evolution of the economy. Normally, central banks have the mandate to guarantee the stability of prices, which in most cases means setting as an objective an underlying inflation rate around 2%.
If inflation falls below the objective, the Central Bank can cut the basic types of interest, in order to stimulate credit and boost the economy. If inflation increases substantially above 2%, the Central Bank usually rises the interest rates of basic loans to try to reduce inflation.
In general, higher interest rates contribute to reinforce the currency of a country, since they make it a more attractive place for world investors to park their money.
The highest interest rates influence the price of gold because they increase the opportunity cost of maintaining gold instead of investing in an asset that accrues interest or depositing effective in the bank.
If interest rates are high, the price of the US dollar (USD) usually rises and, as gold quotes in dollars, the price of low gold.
The federal funds rate is the type to a day that US banks lend each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set at a fork, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the aforementioned figure.
Market expectations on the interest rate of the Federal Reserve funds are followed by the Fedwatch of the CME tool, which determines the behavior of many financial markets in the forecast of future monetary policy decisions of the Federal Reserve.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
