Japanese Yen and Aussie Dollar News: Japan’s GDP, the RBA, and the Fed in Focus

USD/JPY: Q4 GDP Report and the Bank of Japan in Focus

On Monday, February 17, economic data from Japan will influence USD/JPY trends amid speculation about another Bank of Japan rate hike.

Economists forecast Japan’s economy to expand by 0.3% in Q4 2024, up from 0.2% in Q3 2024. A sharper pickup in economic activity could further boost market bets on an H1 2025 BoJ rate hike. However, the devil may be in the details.

The BoJ recently signaled a willingness to tighten monetary policy further if the economy and prices align with the Bank’s projections. Private consumption, a key driver of inflation trends, will be a focal point. Economists expect private consumption to fall 0.3% quarter-on-quarter in Q4 2024 after rising 0.7% in the previous quarter.

A larger decline may signal softer demand-driven inflation pressures, potentially lowering bets on an H1 2025 BoJ move. Under this scenario, the USD/JPY pair could target a return to 155. Conversely, an unexpected rise in consumption may cement a near-term BoJ rate hike, potentially pulling the pair toward 150.

Other economic indicators include finalized industrial production data. However, this will likely play second fiddle to the GDP report amid increasing scrutiny of Japan’s economic outlook.

USD/JPY Trends: Fed Speakers in Focus

Shifting to the US, FOMC members’ commentary requires consideration. Members Patrick Harker, Michelle Bowman, and Christopher Waller will speak during Monday’s session.

Reactions to last week’s inflation and retail sales reports will influence US dollar demand. Concerns about elevated inflation and US tariffs could delay Fed rate cuts. Under this scenario, the USD/JPY pair may return to 153, potentially targeting the 50-day Exponential Moving Average (EMA).

Conversely, support for an H1 2025 rate cut, following softer producer prices and retail sales, could drag the pair below the 200-day EMA. A break below the 200-day EMA may allow the bears to target the 150 level.

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

AUD/USD: RBA Interest Rate Decision and Press Conference Loom

For the Australian dollar, traders will shift their focus to Tuesday’s RBA interest rate decision and Governor Michele Bullock’s press conference, both key for AUD/USD price action.

Economists expect the RBA to lower the cash rate by 25 basis points to 4.1%, on February 18. Unless the RBA unexpectedly holds rates steady, the market focus will turn to RBA Governor Bullock’s press conference.

Recent inflation figures have fueled speculation about multiple RBA rate cuts in H1 2025. However, US President Trump’s foreign policies add uncertainty to Australia’s economic outlook, making the press conference more significant.

A hawkish tone from Governor Bullock, despite the rate cut, could suggest a post-February hold on rates, driving Aussie dollar demand. Conversely, concerns about the economy and confidence that inflation is sustainably moving to the mid-range of the RBA’s 2-3% target could signal multiple rate cuts, potentially impacting the Aussie dollar.

Expert Views on the Upcoming RBA Rate Decision and Policy Outlook

Natixis Asia Pacific Chief Economist Alicia Garcia provided key insights on the RBA’s challenges:

• Australia’s disinflation trend should be sufficient for a 25-basis point February rate cut:

“The Reserve Bank’s favorite measure of underlying inflation softened to 3.2% YoY in Q4-24, below the RBA’s own projection on the Statement of Monetary Policy back in November. Considering that the RBA stated in December that, if future flow of data is in line with or weaker than expectations, they could “begin relaxing the degree of monetary policy tightness”, an interest rate cut should be coming.”

• US-China Trade Tensions Pose Risks for Australia:

“Australia could be hit indirectly, especially if China slows down further due to US tariffs or US containment more generally.”

• Fed Stance on Rate Cuts and the AUD/USD Outlook:

“A consequence of this, as well as the still weak Chinese economy and RMB, is an even weaker Aussie against the USD, which has hit 0.62. An aggressive easing by the RBA could further depreciate the Aussie, with potentially negative consequences on inflation.”

Garcia Herrero expects the RBA to cut rates on Tuesday and begin a gradual, data-dependent easing cycle.

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, Fed forward guidance could further influence the US-Aussie interest rate differential.

Recent US inflation and consumer spending figures have sent mixed signals. While the US CPI Report signaled a more hawkish Fed rate path, certain components of the producer price report and retail sales indicated a softer inflation outlook.

Hawkish FOMC member forward guidance could widen the interest rate differential, pulling the AUD/USD pair toward the 50-day EMA. Conversely, support for rate cuts to bolster consumption and the economy may drive the pair above the $0.63623 resistance level toward $0.64.

Market Trends: Central Banks and Trade Policies in Focus

Key macroeconomic drivers influencing currency markets include:

• BoJ forward guidance: A key determinant of Japanese Yen demand and USD/JPY direction.
• FOMC Commentary: Critical for assessing the Fed’s monetary policy path.
• AUD/USD sensitivity to US-China Relations: Trade tensions and RBA policy decisions will remain central to Aussie dollar performance.

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