Japanese Yen and Australian Dollar News: BoJ and RBA Governors in the Spotlight

Bank of Japan Governor Ueda in Focus Amid Rate Hike Speculation

The Bank of Japan and the USD/JPY will be in the spotlight on Thursday, November 21. Wednesday’s trade data signaled a notable pickup in demand, painting a rosier picture of Japan’s economy.

Later this morning, Bank of Japan Governor Kazuo Ueda will speak. His insights on tariffs, the economic outlook, inflation, and the timing for an interest rate hike could be crucial for the USD/JPY pair.

Support for a December BoJ rate hike may pull the USD/JPY toward 154. Conversely, the pair could move toward 156 if the BoJ Governor holds back from offering a timeline for a rate hike.

Earlier this week, the BoJ Governor failed to boost demand for the Japanese Yen despite reiterating the Bank’s data-dependent gradual approach to adjusting monetary policy accommodation. Since the BoJ Governor’s speech, the USD/JPY has recovered from the sub-154 level to the 155 mark.

US Tariffs, China, and Japan’s Trade Terms

Another consideration may be potential US tariffs on Chinese goods, possibly impacting global trade terms. China could attempt to redirect exports to non-US markets at rock-bottom prices, potentially affecting Japanese companies domestically and overseas.

Trade tensions under Trump’s 2017-2021 administration previously fueled uncertainty, leading to slower export growth despite diversification efforts.

Adding to the uncertainty, Japan’s services sector relies heavily on manufacturing, with 20-25% of its revenue tied to the manufacturing sector. Weaker demand could hurt wage growth and consumer spending, curbing inflationary pressures.

Japanese Yen Daily Chart

During the US session, initial jobless claims and the Philly Fed Manufacturing Index could impact the USD/JPY.

An unexpected fall in jobless claims and stronger manufacturing data may reduce bets on a December Fed rate cut, supporting a USD/JPY return to 156. Conversely, a jump in claims and a slump in manufacturing sector activity could drag the pair toward 154, a crucial support level.

AUD/USD and the RBA Rate Path

Shifting focus to the Aussie economic calendar and the AUD/USD, RBA Governor Bullock is on the calendar to speak later today.

Comments regarding the labor market, consumer spending, underlying inflation, and rate cuts need consideration. Headline inflation has dropped to the RBA’s target range, falling from 2.7% in August to 2.1% in September. However,  Tuesday’s RBA Meeting Minutes highlighted upside risks to inflation, fueling policy uncertainty. The Minutes stated,

“It is not possible to rule anything in or out in relation to future changes in the cash rate target,”

RBA Governor Bullock’s support for a Q1 2025 RBA rate cut could pull the AUD/USD pair toward $0.64500. Conversely, concerns about a potential spike in inflation could sink bets on a Q1 2025 RBA rate cut, potentially driving the pair toward $0.65500.

Expert Views on the RBA Rate Path

AMP Head of Investment Strategy and Chief Economist Shane Oliver remarked on the RBA Meeting Minutes, stating,

“RBA mins reiterated its “not ruling anything in or out” & noted the importance of being fwd looking but also continued to repeat hawkish language re excess demand & vigilance to upside infl risks. A further fall in underlying infl in Q4 should allow a Feb cut but risk is later.”

Australian Dollar Daily Chart

Turning our focus to Thursday’s US session, US jobless claims could influence the Fed rate path and AUD/USD. An unexpected spike in jobless claims may refuel investor bets on a December Fed rate cut, driving the AUD/USD through $0.65500. Conversely, tighter labor market conditions may drive consumption and inflation, potentially pulling the pair toward $0.64500.

Beyond the data, FOMC member commentary could also move the dial amidst shifting sentiment toward the Fed rate path. FOMC members Austan Goolsbee and Beth Hammack are scheduled to speak. Insights into the US labor market, inflation, and the Fed rate path will be crucial for US dollar demand.

Traders should closely monitor central bank communications and economic data for real-time insights. Both USD/JPY and AUD/USD remain sensitive to shifting policy expectations, underscoring the importance of staying informed in today’s volatile market environment.