Japanese Yen and Aussie Dollar News: Trump’s Tariff Plans in the Spotlight

USD/JPY: Japan’s Current Account Surplus Slides

On Monday, February 10, the USD/JPY pair was in focus, with current account figures pressuring the Japanese Yen. The current account surplus fell sharply from ¥3,352.5 billion in November to ¥1,077.3 billion in December.

Notably, the USD/JPY advanced after the data release, rising from 151.744 to 151.866.

Traders consider current account trends a leading economic indicator, reflecting Japan’s trade terms. A narrowing current account surplus suggests weaker trade terms, where Japan imports more than it exports, leading to an overall reduction in Japanese Yen demand relative to the US dollar.

Typically, a narrowing in the surplus may challenge the Bank of Japan’s plans to hike rates further as it may reflect broader economic challenges.

Bank of Japan Governor Kazuo Ueda and Deputy Governor Himino recently signaled the possibility of another rate hike if the economy and prices align with the BoJ’s projections. While traders consider the current account a barometer of economic health, recent wage growth data still supports the case for further rate hikes. However, uncertainty surrounding US tariffs could pose risks.

Financial news outlet The Kobeissi Letter reported that US President Trump plans reciprocal tariffs, potentially escalating the US-China trade war and impacting global trade flows.

USD/JPY Trends: Inflation in Focus

Shifting to the US, consumer inflation expectations are in focus ahead of the crucial US CPI Report. Economists expect consumer inflation expectations to rise from 3% in December to 3.1% in January. Consumer inflation expectations could influence consumer spending plans. Notably, higher inflation expectations may lead to increased near-term spending, potentially fueling demand-driven inflation.

A pickup in consumption and inflationary pressures may delay Fed rate cuts, driving US dollar demand.

Higher-than-expected inflation expectations could push the USD/JPY pair above the 200-day EMA. Conversely, a softer reading may pull the pair toward the 50-day EMA, indicating a potential bearish trend.

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

The AUD/USD: US Tariffs and China in Focus

For the Australian dollar, an escalation in the US-China trade war could impact the AUD/USD pair. China recently announced retaliatory tariffs on US goods, threatening counter-tariffs from the US. China’s tariffs take effect on February 10. On February 9, US President Trump announced plans to roll out 25% tariffs on all steel and aluminum imports into the US. He also warned of reciprocal tariffs on selected nations, potentially China.

A full-blown US-China trade war could reduce China’s demand for Aussie goods, weakening Australia’s export-driven economy. Given China accounts for one-third of Aussie exports, the Australian dollar could come under pressure.

In December, RBA Governor Michele Bullock underscored the significance of President Trump’s policies on the Australian economy, stating:

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

Considering Governor Bullock’s comments, an escalation in the trade war may increase speculation about multiple RBA rate cuts in H1 2025. A more dovish RBA rate path could pull the AUD/USD pair toward $0.62.

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, higher-than-expected consumer inflation expectations may signal a more hawkish Fed rate path. Falling bets on an H1 2025 Fed rate cut could widen the US-Australia interest rate differential in favor of the US dollar. The AUD/USD would likely respond, potentially falling toward the crucial $0.62 support level. A drop below $0.62 may enable the bears to target the upper trend line of the descending channel.

Conversely, a softer inflation reading may ease inflation concerns, driving the pair toward $0.63 and the 50-day EMA. A break above the 50-day EMA may signal a breakout toward the 200-day EMA.

However, traders may hold back on any major moves until after the US CPI Report, Fed Chair Powell’s testimonies, and President Trump’s policy announcements.

Market Trends: Central Banks and Trade Policies in Focus

Broader market trends suggest that central banks remain key drivers of currency movements:

• The BoJ’s interest rate plans will affect Japanese demand and the USD/JPY trajectory.
• US inflation data will influence the broader dollar direction.
• AUD/USD remains highly sensitive to US-China tariff developments and RBA policy shifts.

Additionally, China’s economic stimulus measures may impact market sentiment in the coming weeks. Fresh stimulus measures targeting domestic consumption could help counter the negative effect of US tariffs on Aussie dollar demand.

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