Japanese Yen and Aussie Dollar News: AUD/USD Slides on Inflation; Fed Up Next

Japan Consumer Confidence and USD/JPY Outlook

On Wednesday, January 29, Japan’s consumer confidence data could influence the USD/JPY pair’s trajectory. Economists forecast the Consumer Confidence Index to rise modestly from 36.2 in December to 36.5 in January.

A larger-than-expected consumer confidence reading could signal a more hawkish Bank of Japan rate path, pressuring the USD/JPY pair. Upward trends in consumer confidence may boost household spending, fueling demand-driven inflation. Higher inflation may prompt the BoJ to raise interest rates again during the first half of 2025.

Conversely, an unexpected fall may impact consumer spending, dampening inflationary pressures. Under this scenario, the BoJ could delay rate hikes, impacting Japanese Yen demand.

On January 24, BoJ Governor Kazuo Ueda underscored the significance of incoming data, stating:

“The timing and pace of adjusting monetary support will depend on economic and price developments at the time. We don’t have any preset idea. We will make a decision at each policy meeting by looking at economic and price developments as well as risks.”

USD/JPY Trends: US Federal Reserve in the Spotlight

Shifting to the US, the Fed interest rate decision and FOMC press conference will affect USD/JPY sentiment. Markets expect the Fed to hold rates at 4.5%. Unless there is an unexpected rate cut, Fed Chair Powell’s press conference will likely provide key insights into the Fed’s policy trajectory.

Concerns about persistent inflation, a tight labor market, and a hot US economy could suggest a more hawkish Fed rate path. Falling bets on an H1 2025 Fed rate cut may drive the USD/JPY pair above the 156.884 resistance level toward 160.

Conversely, support for a near-term rate cut would signal a more dovish Fed rate path, potentially dragging the pair below the 50-day Exponential Moving Average (EMA) toward the 200-day EMA.

Additionally, Fed Chair Powell’s response to President Trump’s call for lower interest rates and the broader implications of Trump’s policies on inflation will influence US dollar trends.

For a comprehensive analysis of USD/JPY trends and trade data insights, check out our detailed reports here.

The AUD/USD: Inflation Spotlights the Looming RBA Policy Decision

For the Australian dollar, Aussie inflation figures influenced the AUD/USD pair. The RBA Trimmed Mean CPI eased from 3.5% in Q3 2024 to 3.2% in Q4 2024, marginally above the Bank’s 2-3% target range.

Softer inflation could cement a February RBA rate cut, potentially supporting a more dovish rate path. In December, RBA Governor Michele Bullock underscored the importance of today’s report, stating:

“If inflation continues to soften, the RBA could become confident about cutting interest rates. […] The RBA will look at the data ahead of the February meeting, including monthly inflation and labor market data.”

Meanwhile, December’s Monthly CPI Indicator rose slightly from 2.3% to 2.5%, remaining within the RBA’s target range.

The AUD/USD pair dropped from $0.62505 to $0.62262 in response to the softer RBA Trimmed Mean CPI, reflecting sentiment toward the RBA rate path.

For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.

Australian Dollar Daily Chart

Turning to the US session, US economic data will likely take a back seat to the FOMC press conference.

Hints about delaying Fed rate cuts to assess the impact of Trump’s policies on inflation could widen the US-Aussie interest rate differential, favoring the US dollar. Expectations for a wider differential could pull the AUD/USD pair toward the upper band of the descending channel.

However, support for a near-term rate cut amid softer inflation expectations could drive the pair above the 50-day EMA, targeting the $0.63623 resistance level.

Market Trends: Central Banks Drive Sentiment

Central banks are among the key drivers of currency markets, with the BoJ’s forward guidance potentially increasing USD/JPY sensitivity to Japanese data and the Fed’s rate path influencing broader dollar trends. Similarly, AUD/USD movements hinge on expectations regarding the RBA’s policy stance.

Additionally, broader themes, such as US tariffs and China’s stimulus strategies, will influence global market sentiment in the coming weeks.

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