AUD/JPY advances further for the second consecutive day, trading around 98.90 during the early European session on Friday. The Australian Dollar (AUD) gains ground against the Japanese Yen (JPY) due to improved risk sentiment following the stronger-than-expected recovery in US Retail Sales, which has eased concerns about a potential recession in the United States (US).

Additionally, hawkish comments from Reserve Bank of Australia (RBA) Governor Michele Bullock are boosting the Aussie Dollar and underpinning the AUD/JPY cross. On Friday, Governor Bullock emphasized that the Australian central bank is focused on potential upside risks to inflation and does not foresee any rate cuts in the near future. The board believes it has found the right balance between curbing inflation and maintaining stability in the current economic environment, per ABC News.

Earlier this week data reported in China showed that Retail Sales grew by 2.7% year-on-year in July, exceeding market forecasts of 2.6% and accelerating from June's 17-month low of 2.0%. This might have supported the Aussie Dollar as both countries are close trade partners.

The upside of the AUD/JPY cross could be limited as the Japanese Yen receives support from the recent GDP report indicating growth in Japan’s second quarter. This consistent growth lends support to the possibility of a near-term interest rate hike by the Bank of Japan (BoJ).

In Japan, political uncertainty may contribute to the downside of the JPY. Japanese Prime Minister Fumio Kishida announced at a press conference on Wednesday that he will not seek re-election as the leader of the Liberal Democratic Party (LDP) in September.

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