Japanese Yen and Aussie Dollar News: BoJ and China’s Economy in Focus

USD/JPY: Bank of Japan Countdown Begins

On Friday, January 17, speculation about a Bank of Japan (BoJ) rate hike could intensify as the focus shifts to next week’s monetary policy decision. The USD/JPY pair could face heightened volatility.

Bank of Japan Governor Kazuo Ueda indicated earlier this week that the January meeting could be pivotal, stating that the Bank would raise rates if economic and price trends show sustained improvement. Wage growth, a key metric, was also a talking point. The BoJ Governor reportedly highlighted that BoJ branch managers held positive views on wages.

BoJ Governor Ueda is not alone in signaling a live January meeting. Last week, BoJ Deputy Governor Ryozo Himino left the door open to a January move, suggesting policymakers are more aligned on monetary policy.

The BoJ will announce its monetary policy decision on January 24. Key data releases between now and the BoJ’s decision include trade data (Jan 23), national inflation figures (Jan 24), and preliminary Services PMI data (Jan 24). Services employment, price trends, and Japan’s core inflation rate could be deciding factors in the BoJ’s decision.

With these numbers out during the BoJ policy meeting, BoJ forward guidance in the lead-up to the meeting could also influence USD/JPY trends.

Expert Views on Japan’s Economy and the BoJ’s Rate Path

East Asia Econ, a research service specializing in the markets and macro of China, Japan, Korea, and Taiwan, remarked on recent consumer confidence trends, stating,

“After a dip in 2H24, the non-manufacturing survey is now back to cycle highs. One retailer was quoted as saying: “With high domestic consumer confidence, the number of customer visits….is growing steadily”. That’s interesting: official surveys don’t show consumer confidence is that strong.”

Improving consumer confidence is a crucial leading indicator for household spending. Upward trends in household spending may drive inflation and Japan’s economy as it accounts for over 60% of GDP.

USD/JPY Trends: Focus Shifts to US CPI Report

Turning to the US session, housing sector data could provide valuable insights, as economists often view housing trends as a barometer for economic health.

Strong housing starts and building permits could signal robust economic conditions, pushing the pair toward resistance at 156.884. On the other hand, weaker data might shift momentum toward the 50-day Exponential Moving Average (EMA).

Investors must also track Federal Open Market Committee (FOMC) member commentary. Reactions to Wednesday’s CPI Report and views on Fed rate cuts need consideration.

AUD/USD: China’s Economy Takes Center Stage

In the case of the Australian dollar, AUD/USD trends could depend on crucial economic data from China. Q4 GDP numbers and December’s industrial production, retail sales, house prices, and unemployment figures will signal the effectiveness of Beijing’s stimulus measures.

Significantly, economists expect China’s economy to expand by 5.0% year-on-year in Q4, up from 4.6% growth in Q3 2024. 5% growth would align with Beijing’s growth target, signaling strong demand.

Improving Chinese trade terms could boost the Aussie export-driven economy, considering China accounts for one-third of Australian exports. China’s macroeconomic backdrop may also influence the RBA rate path. However, markets must consider whether China’s surge in exports was due to front-loading, ahead of tariffs, or stimulus measures.

Beyond the headline GDP figures, home prices, retail sales, and unemployment trends could give insights into domestic consumption. Weaker-than-expected data could pressure Beijing to roll out a comprehensive stimulus package to bolster its economy.

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

Australian Dollar Daily Chart

In the US session, US housing sector data may influence the US-Aussie interest rate differential.

Upbeat figures could temper bets on a  near-term Fed rate cut, widening the differential in favor of the US dollar.The AUD/USD could fall toward $0.61500 on hawkish Fed bets. Conversely, weaker data could support a more dovish Fed rate path, potentially driving the pair toward $0.63 and the 50-day EMA.

Global Market Trends: A Trader’s Guide

Central bank policies remain pivotal for AUD/USD and USD/JPY trends. Wage growth, inflation, and monetary policy decisions from the BoJ and RBA will dominate market sentiment in early 2025. Broader macroeconomic themes, including US tariffs and China’s stimulus strategies, will further influence the trading landscape.

For comprehensive insights into these market movements, explore our in-depth reports here.