Societe Generale Research flags a scope for further gains in AUD against the JPY in light of this week's FOMC meeting and Australia's employment report.

 

"The ‘currency of the week’ is the Australian dollar. The unemployment rate fell from 6.3% to 5.8 % in February and more importantly, employment rose back above 13 million, to within 2000 of the pre-pandemic peak. Full-time employment made a new historic high," SocGen notes.

 

"The bottom line is that the Fed is more tolerant of inflation now and real rates will stay lower for longer than they would have under previous FOMCs. That is incompatible with the dollar’s current valuation. If US bond investors are spooked, break evens rise and equities suffer, the dollar can get a short-term lift but otherwise, it’s set to weaken...But Jay Powell’s willingness to take a risk with inflation, should add more upside to AUD/JPY while giving other CB’s. like the Bank of Canada, a headache," SocGen adds.