AUD/JPY languishes near weekly low, above mid-95.00s amid notable JPY strength

• AUD/JPY attracts sellers for the third straight day on Friday amid a broadly stronger JPY.
• Japan's upbeat Q2 GDP reaffirms BoJ rate hike bets and provides a goodish lift to the JPY.
• The risk-on mood could cap the safe-haven JPY and lend support to the risk-sensitive Aussie.

The AUD/JPY cross maintains its offered tone through the first half of the European session on Friday and remains well within striking distance of a one-week low touched the previous day. Spot prices currently trade around the 95.65-95.70 region and seem vulnerable amid a broadly stronger Japanese Yen (JPY).

The preliminary reading released by Japan's Cabinet Office earlier today showed that the Japanese economy expanded at 1% annualized pace during the April-June period. The reading was well above consensus estimates for a 0.4% rise and also marked a turnaround from a contraction of 0.2% recorded in the first quarter. The data validated the Bank of Japan's (BoJ) hawkish view and kept the door open for an imminent rate hike by the end of this year. This, in turn, provides a fresh boost to the JPY and turns out to be a key factor exerting downward pressure on the AUD/JPY cross.

The Australian Dollar's (AUD) relative underperformance against the JPY could further be attributed to the Reserve Bank of Australia's (RBA) dovish rate cut earlier this week. In fact, the RBA slashed its cash rate for the third time in 2025, to the lowest since April 2023, and said that cooling inflation will likely spur more rate cuts. Adding to this, RBA Governor Michele Bullock did not rule out back-to-back rate cuts. This, in turn, is seen as another factor that contributes to the offered tone surrounding the AUD/JPY cross and validates the near-term negative outlook for spot prices.

Meanwhile, the global risk sentiment remains well supported by the optimism over an extension of the US-China trade truce for another three months and hopes that the US-Russia summit will increase the chances of ending the prolonged war in Ukraine. This could act as a headwind for the safe-haven JPY and offer some support to the risk-sensitive Aussie. Nevertheless, the AUD/JPY cross remains on track to register modest weekly losses.