Japanese Yen and Aussie Dollar News: US Tariff Developments in Focus Pre-BoJ

BoJ Policy Meeting to Define USD/JPY Trends

On Wednesday, January 22, the USD/JPY pair remains under scrutiny as investors consider the upcoming Bank of Japan (BoJ) monetary policy meeting. Speculation has intensified about a potential 25 basis point rate hike on Friday, January 24.

The BoJ has hinted that strong wage growth trends could support a Friday move. Rising wages may fuel household spending and demand-driven inflation.

Despite expectations of an imminent rate hike, the USD/JPY pair has remained relatively steady around the 155.5 level. The pair’s trends suggest the markets’ primary focus will be on the BoJ’s forward guidance.

Upcoming Services PMI and inflation figures may define the BoJ’s rate path. Economists expect Japan’s core inflation rate to rise from 2.7% in November to 3.0% in December and services sector activity to pick up moderately in January.

In line with or better-than-expected numbers could enable the BoJ to signal a more hawkish rate path, boosting Japanese Yen demand. Conversely, softer data and a hike-and-hold approach may pressure the Yen, potentially triggering intervention threats.

On Wednesday, investors should monitor BoJ forward guidance. Insights into wages, inflation, and the rate path could be crucial to USD/JPY trends ahead of Friday’s decision.

Expert Views on the BoJ’s Monetary Policy Outlook

On Friday, January 17, Natixis Asia Pacific Chief Economist Alicia Garcia Herrero emphasized market expectations of a BoJ rate hike.

She noted that the BoJ will likely raise rates by 25 bps as the Bank’s confidence in the spring wage negotiations has improved. Garcia Herrero also believed that the status quo could encourage carry trades, weakening the Yen and raising import prices. Higher import prices could impact living costs, household spending, and inflation. The BoJ would likely want to avoid this scenario.

USD/JPY Trends: Trump Administration and the Fed in Focus

Turning to the US, investors should monitor FOMC member commentary and policy-related updates from the Trump administration.

FOMC member support to hold rates steady to assess Trump’s policies and potential effects on inflation and the economy could push the USD/JPY toward 160. Conversely, support for a rate cut may drag the pair below the 50-day Exponential Moving Average (EMA). A drop below the 50-day EMA would bring the 200-day EMA and the 149.358 support level into play.

Markets would likely need a dovish Fed stance and a hawkish BoJ to pull the USD/JPY below 150.

AUD/USD: RBA and China in Focus

In the case of the Australian dollar, AUD/USD trends hinge on wage growth and inflation figures. Softer wage growth and inflation could cement bets on a February RBA rate cut and signal a more dovish RBA rate path.

However, Trump’s tariff plans also require consideration. Tariffs on China could impact demand, potentially affecting Aussie trade terms. China accounts for one-third of Australia’s exports. With a trade-to-GDP ratio above 50%, weaker demand from China could affect the Aussie economy and labor market. Significantly, around 20% of Australia’s workforce is in trade-related jobs.

Falling inflation and weaker demand might enable the RBA to cut rates more aggressively. In December, RBA Governor Michele Bullock highlighted the significance of China and US policy, saying,

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

Expectations of a February rate cut and hints at a more dovish RBA rate path may pull the AUD/USD pair toward $0.60. Conversely, a February cut and a wait-and-see approach may drive the pair toward $0.63.

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, US tariff developments and FOMC member commentary require monitoring.

Threats of sweeping tariffs could fuel inflation concerns, potentially delaying Fed rate cuts. A widening US-Aussie interest rate differential, favoring the US dollar, could drag the AUD/USD pair toward $0.60. Conversely, discussions about a gradual tariff rollout and a more dovish Fed rate path would likely push the pair toward $0.63.

Global Market Trends: A Trader’s Guide

Wage growth, inflation, and central bank commentary remain pivotal drivers of currency markets. The BoJ’s rate decision and the RBA’s view on inflation and the labor market will set the tone for Q1 2025. Broader themes, including US tariffs and China’s stimulus strategies, will further dictate global market sentiment.

For comprehensive insights into these market movements, explore our in-depth reports here.