Japanese Yen and Aussie Dollar News: US Inflation to Impact Near-Term Trends

Tokyo Inflation and National Retail Sales Impact BoJ Stance

On Friday, February 28, Japan’s retail sales and Tokyo inflation data impacted USD/JPY trends and the Bank of Japan’s policy outlook.

Tokyo’s core inflation rate eased from 2.5% in January to 2.2% in February, dropping toward the BoJ’s 2% target. Softer core inflation could temper market expectations of an H1 2025 BoJ rate hike.

Meanwhile, retail sales rose 3.9% year-on-year in January, up from 3.7% in December but below the 4% consensus forecast. Despite missing expectations, the upward trend in retail sales could fuel demand-driven inflation. A higher inflation outlook may counter Tokyo’s softer inflation print, boosting bets on a BoJ move.

The upswing in retail sales followed a recent jump in wage growth, suggesting higher disposable incomes translate into consumption, crucial for the economy and the BoJ.

Ahead of the morning reports, the USD/JPY pair briefly climbed to a high of 149.807 before falling to a low of 149.700. However, in response to the data, the pair jumped from 149.547 to 150.018, signaling expectations of a cautious BoJ stance.

BoJ Policy Outlook: Ueda Flags Global Risks

At the G20 Summit on February 27, BoJ Governor Kazuo Ueda warned of global uncertainties stemming from US policy shifts. Governor Ueda also highlighted US policy could influence BoJ policy decisions, stating:

“We then need to take a comprehensive view on how (the US policies) affect the global economy, financial markets, and Japan’s economic and price outlook.”

Rising wages, higher national inflation, and resilient private consumption have fueled speculation about another 25-basis point BoJ hike. However, Governor Ueda’s comments suggest a near-term wait-and-see approach to assess US policies and their global impact.

USD/JPY Trends: US Inflation to Spotlight the Fed

Shifting to the US session, the crucial Personal Income and Outlays Report will influence the Fed rate path. Economists forecast the Core PCE Price Index to rise 2.6% year-on-year in January, down from 2.8% in December, while expecting personal income and spending to increase modestly.

Lower-than-expected readings could increase market bets on an H1 2025 Fed rate cut, potentially pulling the USD/JPY pair toward 148.5. Conversely, firm inflation and rising personal income and spending could dampen expectations of near-term rate cuts, potentially driving the pair toward its 200-day Exponential Moving Average (EMA).

Beyond the data, investors should monitor US tariff developments and FOMC members’ insights into inflation, the labor market, and the Fed’s policy outlook.

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

AUD/USD: Private Sector Credit and RBA Policy Outlook

On Friday, February 28, Aussie private sector credit data influenced the AUD/USD pair and RBA rate cut bets. Private sector credit rose 6.5% year-on-year in January, mirroring December’s increase.

Steady demand for private sector credit could signal resilient household spending, fueling inflationary pressures. A higher inflation outlook may lower the odds of a second H1 2025 RBA rate cut. A less dovish RBA rate path could drive the AUD/USD pair toward the February 21 high of $0.64081.

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, hotter-than-expected inflation could impact Fed rate cut bets and the US-Aussie interest rate differential. A widening rate differential, favoring the US dollar, may drag the AUD/USD pair toward $0.60 on fading Fed rate cut expectations.

Conversely, softer inflation and weaker personal spending and income readings could boost expectations of multiple 2025 Fed rate cuts. A more dovish Fed policy outlook could narrow the rate differential in favor of the Aussie dollar, supporting an AUD/USD move toward $0.64.

Traders should also monitor US-China trade tensions. Rising tensions between the US and China, in particular, may weigh on Aussie exports and the Aussie dollar, given Australia has a trade-to-GDP ratio of over 50%.

Market Trends: Central Banks and Trade Policies in Focus

Key macroeconomic drivers influencing currency markets include:

• BoJ Forward Guidance: Stronger Japanese data could send Japanese Government Bond (JGB) yields higher. Rising yields may increase the risk of intervention warnings and potential currency pullbacks.
• US Economic Data and Tariff Policies: Resilient inflation, rising personal income and spending, and potential tariffs could reinforce a hawkish Fed stance, supporting the dollar.
• AUD/USD Outlook: Aussie inflation, wage trends, unemployment figures, and US-China trade developments will remain crucial drivers of RBA policy expectations.

Click here to read expert USD/JPY and AUD/USD forecasts for deeper insights.