Japanese Yen and Aussie Dollar News: BoJ and Fed Policy Divergence Sets Trading Tone

Bank of Japan’s Summary of Opinions to Drive USD/JPY Trends

On Monday, February 3, the Bank of Japan’s Summary of Opinions will likely influence the USD/JPY pair’s trajectory and sentiment toward the BoJ’s rate path.

The Bank of Japan raised interest rates by 25 basis points to 0.50% on January 24, aligned with market expectations. Since then, Bank of Japan Governor Kazuo Ueda and Deputy Governor Ryozo Himino have signaled the possibility of further rate hikes if the economy and prices move in line with forecasts.

The Summary of Opinions will give further insights into policymakers’ views on the economy, inflation trends, and the BoJ’s rate path.

Recent economic indicators have signaled another potential rate hike in H1 2025. Retail sales grew 3.7% year-on-year in December, up from 2.8% in November, while Tokyo’s core inflation rose to 2.5% in January from a 2.4% rise in December.

Despite these trends, market participants remain uncertain about the BoJ rate path, highlighting the significance of the Summary of Opinions. Research service firm East Asia Econ stated:

“Japan – still not the right inflation. Ideally, the BOJ wants the participation rate to peak, higher wages to make consumers more positive, and both demand-pull and supply-push to drive inflation. Instead, consumption is sluggish as rising goods price inflation outpaces wages, with the part rate continuing to rise.”

If the Summary of Opinions signals further rate hikes, the USD/JPY pair could drop below the 50-day Exponential Moving Average (EMA). A break below the 50-day EMA could signal a fall toward 153 and the 200-day . Conversely, a dovish tone may weaken the Yen, driving the USD/JPY pair toward the 156.884 resistance level.

USD/JPY Trends: US Manufacturing in Focus

Shifting to the US, the ISM Manufacturing PMI will draw interest. Economists expect the PMI to increase from 49.3 in December to 49.5 in January.

A larger-than-expected PMI reading, alongside upward trends in employment and prices, could support a more hawkish Fed rate path. Under this scenario, the USD/JPY pair may move toward the 156.884 resistance level. Conversely, weaker PMI data may raise bets on an H1 2025 Fed rate cut, potentially pulling the pair below the 50-day EMA, toward the 153 level and the 200-day EMA.

Beyond PMI data, market participants will also evaluate the impact of US trade policies on inflation. Fed concerns about tariffs fueling inflationary pressures could suggest a wait-and-see approach to monetary policy. A higher for longer Fed rate path may drive US dollar demand.

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

The AUD/USD: Retail Sales and Job Ads in Focus

For the Australian dollar, Aussie retail sales and ANZ-Indeed Job Ads will be key drivers of AUD/USD trends.

Economists forecast retail sales to fall 0.7% month-on-month in December after rising 0.8% in November. A larger-than-expected fall in retail sales could signal a softer inflation outlook, supporting a more dovish RBA rate path. Conversely, an unexpected increase could fuel demand-driven inflation, potentially tempering bets on multiple RBA rate cuts in H1 2025.

Economists expect job ads to rise 0.2% month-on-month in January after a 0.3% increase in December.

Rising bets on multiple RBA rate cuts in H1 2025 could drag the AUD/USD pair below the upper band of the descending channel. However, upbeat data may suggest a less dovish RBA rate path, potentially pushing the pair toward the 50-day EMA and the $0.63623 resistance level.

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, a pickup in manufacturing sector activity, employment gains, and higher prices could affect the US-Aussie interest rate differential. A more hawkish Fed rate path would widen the gap in favor of the US dollar. Under this scenario, the AUD/USD pair may drop below the upper band of the descending channel toward $0.61.

Conversely, falling employment and prices could revive Fed rate cut bets. A more dovish Fed stance could drive the AUD/USD pair toward the 50-day EMA. A breakout from the 50-day EMA would bring the $0.63623 resistance level into sight.

Market Trends: Central Banks Drive Sentiment

Central banks remain key drivers of currency markets. The BoJ’s forward guidance could increase USD/JPY’s sensitivity to Japanese economic data, while US data will influence broader dollar trends. Meanwhile, AUD/USD movements will hinge on expectations surrounding the RBA’s policy stance.

Additionally, global factors, such as US trade policies and China’s stimulus measures, may influence broader market sentiment in the coming weeks.

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