Japanese Yen and Aussie Dollar News: Geopolitics and US Retail Sales in Focus

USD/JPY: Japan’s Economy and BoJ Cues

On Friday, February 14, traders should brace for increased volatility in USD/JPY, with Bank of Japan forward guidance expected to influence Japanese Yen demand. Recent economic data has boosted expectations of a second H1 2025 Bank of Japan rate hike.

Japan’s producer prices, out on February 13, rose 4.2% year-on-year in January, up from 3.9% in December. Economists consider producer prices a leading inflation indicator as producers pass rising costs, or cost savings, on to consumers subject to demand conditions. January’s data suggests a sharp pickup in demand, potentially fueling demand-driven inflationary pressures.

Meanwhile, wage growth data has further reinforced expectations of BoJ rate hikes. Average cash earnings jumped 4.8% year-on-year in December, up from November’s 3.3% rise. Wage growth is crucial for the BoJ, which needs demand-driven inflation to support a policy move toward normalization.

Global Markets Investor commented on December’s wage growth trends:

Expect MORE rate hikes in Japan this year: Japanese wages, key indicator for the Bank of Japan’s policy decisions grew 4.8% in December, the FASTEST pace in ~3 DECADES.”

Considering the latest data, BoJ forward guidance could be crucial. Bank of Japan support for multiple rate hikes could pull the USD/JPY pair toward 150. However, calls for a delay to rate hikes amid uncertainty toward Trump policies could drive the pair above 155.

USD/JPY Trends: US Retail Sales in Focus

Shifting to the US, retail sales figures will give traders insights into the demand environment. Economists expect retail sales to rise 3.7% year-on-year in January, down from 3.9% in December.

Weaker-than-expected retail sales could signal a softer inflation outlook, potentially reviving H1 2025 Fed rate cut bets. Under this scenario, the USD/JPY pair could drop toward the 200-day Exponential Moving Average (EMA). A fall through the 200-day EMA would bring the 149.358 support level into play.

Conversely, a higher retail sales reading could support a more hawkish Fed rate stance, fueling US dollar demand. A more hawkish Fed rate path may drive the USD/JPY toward the 50-day EMA. A break above the 50-day EMA could bring the 156.884 resistance level into sight.

Explore in-depth USD/JPY trade setups and expert forecasts here.

AUD/USD: Is an RBA Rate Cut Next Week Already Priced In?

For the Australian dollar, RBA rate cut speculation will influence AUD/USD trends on February 14. Unlike the BoJ, markets expect the RBA to cut the cash rate by 25 basis points on February 18.

Aussie inflation data has fueled speculation of multiple H1 2025 RBA rate cuts, capping the upside for the AUD/USD pair even as US dollar demand wanes due to easing  geopolitical risks.

Australian consumer inflation expectations rose to 4.6% in February, up from 4.0% in January. Despite the upswing, the broader trend remains downward, aligning with the recent pullback in the RBA’s trimmed mean CPI. The RBA Trimmed Mean CPI rose 3.2% year-on-year in Q4 2024, down from 3.6% in Q3 2024, approaching the central bank’s 2-3% target range.

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, commented on the consumer inflation expectation data, stating:

“Australian consumer inflation expectations ticked up in February but with the trend remaining down.”

Additionally, an escalation in the US-China trade war could further influence RBA policy decisions and forward guidance. In December, RBA Michele Bullock highlighted China’s role in the Australian economy, stating:

“US moves against China could affect Aussie trade terms with China, potentially impacting the Aussie economy.”

China’s influence on the Aussie economy exposes the AUD/USD to US-China tariff developments. Hopes of the US and China avoiding a full-blown trade war could boost near-term Aussie dollar demand, potentially pushing the AUD/USD pair higher. However, expectations of multiple RBA rate cuts remain an Aussie dollar headwind.

Conversely, an escalation in the US-China trade war may drag the AUD/USD pair below $0.63.

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

Australian Dollar Daily Chart

Heading into the US session, retail sales data could influence Fed rate expectations, impacting AUD/USD price action.

Stronger-than-expected retail sales could support a more hawkish Fed stance. Fading bets on a Fed rate cut in 2025 would widen the US-Australia interest rate differential in favor of the US dollar. In this case, the AUD/USD pair may drop below the 50-day EMA, bringing $0.62500 into play.

Conversely, a softer retail sales reading may narrow the interest rate differential, potentially driving the pair toward the $0.63623 resistance level.

Market Trends: Central Banks and Trade Policies in Focus

Key macroeconomic drivers dictating currency trends include:

• BoJ forward guidance: A key determinant of Japanese Yen demand and USD/JPY direction.
• US retail sales data: Critical for assessing the Fed’s monetary policy trajectory.
• AUD/USD sensitivity to US-China trade relations and RBA policy: A major factor in Aussie dollar performance.

Additionally, China’s economic stimulus measures could influence Aussie dollar demand in the near term. China’s stimulus measures targeting domestic consumption could offset the negative effects of US tariffs, offering near-term Aussie dollar support.

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