Japanese Yen and Australia Dollar News: Japan’s Trade Data and the PBoC in Focus

Japan’s Trade Data to Spotlight USD/JPY

On Wednesday, November 20, Japan’s trade data will spotlight the USD/JPY amid increasing speculation about a Bank of Japan rate hike. Economists expect exports will increase by 2.2% year-on-year in October after falling 1.7% in September. A rebound could boost the Japanese economy, with the weaker Yen likely driving demand for Japanese goods.

In contrast, economists forecast imports to drop by 0.3% after rising 2.1% in September. An import pullback might signal weakening domestic demand. A weaker Japanese Yen can raise import prices, potentially tempering domestic private consumption. Private consumption, accounting for around 60% of GDP, is crucial for inflation trends and the BoJ rate path.

Better-than-expected trade data could drag the USD/JPY below 154. Conversely, weaker-than-predicted figures could temper bets on a December BoJ rate hike, potentially driving the USD/JPY toward 156.

BoJ Rate Path: Expert Insights

Bank of Japan Governor Kazuo Ueda recently commented that Japan’s economy is progressing toward sustainable inflation, bolstered by wage growth. While his comments left a BoJ rate hike on the table, he did not commit to a timeline, leaving the USD/JPY above the 154.5 mark.

Economic indicators and prices remain crucial. Today’s trade data and Friday’s national inflation figures may fuel speculation about a December rate hike and Yen volatility.

Japanese Yen Daily Chart

In the US session, FOMC member commentary could influence US dollar demand. Upbeat US economic data has reduced bets on a December Fed rate cut. FOMC member support to delay interest rate cuts may drive the USD/JPY pair toward 156. Conversely, calls for a December rate cut might pull the pair toward 153.5.

AUD/USD and Economic Drivers

Turning to the Aussie economic calendar and the AUD/USD, the Westpac Leading Index may affect Aussie dollar demand. Economists forecast the Westpac Leading Index to increase by 0.1% in October after holding steady in September.

Unemployment expectations and consumer sentiment trends contribute to the Index, giving insights into the economic outlook. Improving sentiment could boost consumer spending and inflation, potentially delaying an RBA rate cut.

A larger-than-expected increase in the Index could drive the AUD/USD through $0.65500. Conversely, an unexpected fall may pull the pair below $0.65.

China’s PBoC and Loan Prime Rates in Focus

Later in the morning, the People’s Bank of China will announce the 1-year and 5-year loan prime rates (LPR). Economists predict the PBoC will maintain the 1-year and 5-year LPRs at 3.1% and 3.6%, respectively. An unexpected cut to the LPRs could boost borrowing and domestic demand.

Accounting for one-third of Aussie exports, increased demand from China could bolster the Australian economy as it has a trade-to-GDP ratio above 50%. PBoC efforts to boost China’s economy may push the AUD/USD through $0.65500 to target $0.66.

RBA Governor Michele Bullock recently discussed the potential effect of US tariffs on China and the Aussie economy, stating,

“It’s not easy to dissect what’s going to happen with all of this. It might be inflationary in some ways. But it might be deflationary in the other ways — if China ends up badly affected by this, that badly affects us.”

Australian Dollar Daily Chart

In Wednesday’s US session, FOMC member commentary could dictate AUD/USD trends.

In the mid-week session, markets remain divided on a December Fed rate cut. Calls to delay interest rate cuts could drive US dollar demand, potentially sending the AUD/USD below $0.65. Conversely, Fed support for a December interest rate cut may push the pair through $0.65500 toward $0.66.

Traders should remain vigilant, tracking central bank statements and economic data for timely insights.