Japanese Yen and Australian Dollar News: BoJ in Focus as Imports Slide

Will Japan’s Trade Data Challenge BoJ Policy Expectations?

On Wednesday, December 18, Japan’s trade data influenced USD/JPY price trends. Exports increased by 3.8% year-on-year in November, up from 3.1% in October. Softer exports signaled strengthening global demand, boosting Japan’s trade-reliant economy. Japan has a trade-to-GDP ratio of about 50%.

However, import data indicated a slump in domestic demand, sliding 3.8% year-on-year in November after a 0.4% increase in October.

The Bank of Japan will consider import trends as import prices could influence household spending and inflation. Previously, the BoJ had warned of potential rate hikes to counter the effect of rising import prices on living costs and private consumption.

Today’s data precedes Thursday’s highly anticipated BoJ monetary policy decision. Markets expect the BoJ to leave rates at 0.25%, making forward guidance crucial for USD/JPY price trends. With imports sliding in November, the BoJ will likely await further wages, household spending, and inflation data before signaling any rate hikes.

A Ueda Yagi Tanshi brokerage poll found that 91% of participants expect rates to hold steady this week, while 95% anticipate a BoJ hike within three months.

Expert Views on the Bank of Japan Rate Path

Global Markets Invest commented on the BoJ rate path outlook, stating,

“The BoJ has hiked rates twice so far this year, and the market is pricing in an over 30% chance of another hike next week and a 90% probability of a raise by the end of March.”

USD/JPY Trends: FOMC Projections and Fed Rate Decisions

Turning our focus to the US session, the Fed interest rate decision, FOMC Economic Projections, and Press Conference will impact USD/JPY trends. Markets expect the Fed to cut rates by 25 basis points, placing greater weight on FOMC projections.

A more hawkish Fed outlook, reducing bets on a Q1 2025 rate cut, could drive the USD/JPY pair toward the 156.884 resistance level.

Conversely, dovish projections, tied to softer inflation and labor market expectations, could boost Q1 2025 rate cut bets, dragging the pair toward the EMAs. A drop below the EMAs would bring the 149.358 support level into play.

AUD/USD: Westpac Leading Index in Focus

Shifting focus to the AUD/USD pair, the Westpac Leading Index came into the spotlight. The Westpac Leading Index increased by 0.1% month-on-month in November, following October’s 0.2% rise. Key components, including growth and unemployment expectations, hold significant weight for the RBA policy outlook.

The report attracted heightened interest following Australia’s unemployment rate drop to 3.9% in November. November’s official figures contrasted with December’s PMI data, which signaled looser labor market conditions.

Improving sentiment may fuel consumer spending and demand-driven inflation, potentially delaying an RBA rate cut and supporting the Aussie dollar.

Beyond the economic calendar, investors should also monitor stimulus-related news from Beijing. Details of stimulus targeting China’s consumers could fuel Aussie dollar demand. A pickup in China’s economy could improve Aussie trade terms as China accounts for one-third of Aussie exports.

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, the Fed interest rate decision and FOMC Economic Projections may impact the interest rate differential between the US and Australia. A 25-basis point Fed rate cut would shift the focus to the Economic Projections.

Dovish revisions to the Fed Funds Rate projections could drive the AUD/USD pair above the $0.63623 resistance level toward the upper trend line. Conversely, projections for fewer Fed rate cuts on stronger inflation and labor market trends could drag the pair below $0.63 to target the lower trend line.

Global Market Trends: Expert Insights for Traders

Shifting sentiment on monetary policy underscores the importance of tracking economic trends and expert commentary. Traders should monitor key releases and adjust strategies accordingly in volatile markets. Click here for a detailed analysis of AUD/USD and USD/JPY trends and trading insights.