AUD/JPY drifts lower to below 96.50 as Australian Unemployment Rate hits 3.5-year high

• AUD/JPY edges lower to around 96.35 in Thursday's early Asian session, losing 0.18% on the day. 
• Australia's Unemployment Rate climbed to 4.3% in June vs. 4.1% prior, signaling potential for more rate cuts. 
• Reduced expectations for an immediate BoJ rate hike might weigh on the Japanese Yen. 

The AUD/JPY cross faces some selling pressure near 96.35 during the Asian trading hours on Thursday. The Australian Dollar (AUD) weakens against the Japanese Yen (JPY) as Australia's Unemployment Rate jumps to a three-and-a-half-year high in June. Traders await Japan's June National Consumer Price Index (CPI) inflation data due later on Friday for fresh impetus. 

Australian employment grew substantially in June. Data released by the Australian Bureau of Statistics (ABS) on Thursday showed that the country's Unemployment Rate rose to 4.3% in June from 4.1% in May. This reading came in above the market consensus of 4.1% and registered the highest since late 2021. This employment report supported the case for a Reserve Bank of Australia (RBA) rate cut next month, which exerts some selling pressure on the Aussie. 

"The consecutive poor jobs prints and the jump in unemployment rate to 4.3% is likely to spook the RBA," said Alex Loo, a macro strategist at Toronto-Dominion Bank in Singapore. "Investors are likely to read that the RBA may opt for consecutive cuts in August and September now," Loo added. 

On the other hand, slowing economic growth in Japan and tariff uncertainty might reduce bets for an immediate Bank of Japan (BoJ) rate hike. This, in turn, might cap the upside for the JPY and act as a tailwind for the cross. 

Furthermore, BoJ may face political pressure to keep interest rates low for longer than it wants, as Japan's Prime Minister Shigeru Ishiba's coalition may lose the upper house majority in Sunday's vote. Analysts expect that if opposition groups gain traction, that could boost bond yields and complicate the BoJ's efforts to normalise monetary policy.