Japanese Yen and Australian Dollar News: Japan and China’s PMIs in Focus

Japan’s Manufacturing Sector Put the Japanese Yen in Focus

On Friday, November 1, the finalized Jibun Bank Manufacturing PMI could influence USD/JPY trends. The PMI fell from 49.7 in September to 49.0 in October, according to the preliminary survey. A downward revision to the PMI could further reduce investor expectations for a Q4 2024 Bank of Japan rate cut.

Beyond the headline PMI, investors should consider new orders.

S&P Global Market Intelligence Economist Usamah Bhatti remarked on the preliminary survey, stating,

“New orders decreased across manufacturing and services. Poor demand conditions were not limited to just the domestic economy as new orders from abroad fell at the quickest pace since February 2023.”

On Thursday, Bank of Japan Governor Kazuo Ueda stated that the Bank will scrutinize income data for future policy decisions. Weakening demand for Japanese goods could pressure the BoJ to maintain the 0.25% interest rate through the remainder of 2024.

Japan’s Political Impasse and the Bank of Japan Rate Path

While economic indicators will draw interest, investors should monitor general election-related updates. The Liberal Democratic Party (LDP) – Komeito coalition is in talks with smaller parties to form a government. The outcome of policy negotiations could prove crucial for the Bank of Japan rate path and the Japanese Yen.

On Thursday, Bank of Japan Governor Kazuo Ueda stated,

“Recent political developments alone won’t directly affect our price forecasts. But if there are big changes in policy, we will revise our forecasts as needed taking into account the impact of such moves.”

Japanese Yen Daily Chart

Turning to the US session, the crucial US Jobs Report will impact US dollar demand. An unexpected fall in the US Unemployment rate could sink bets on a December Fed rate cut. A more hawkish Fed rate path could drive the USD/JPY through 154, a significant resistance level this week.

Conversely, an unexpected rise in the US unemployment rate may fuel speculation about a December rate cut, potentially dragging the USD/JPY below 151.5.

Aussie Producer Prices and the RBA

Switching to the AUD/USD pair, Aussie producer prices will require consideration. Economists forecast producer prices to increase by 0.7% in Q3 2024, down from 1% in Q2 2024. Significantly, softer-than-expected producer prices could signal a further fall in inflation. Producers lower prices in a weakening demand environment, passing savings on to consumers.

The figures follow Wednesday’s inflation data that signaled a potential December RBA rate cut.

Expert Views on Aussie Inflation and the RBA Rate Path

AMP Head of Investment Strategy and Chief Economist Shane Oliver remarked on Wednesday’s inflation figures, stating,

“The Mthly CPI Indicator shows the fall in inflation continued in Sept with headline infl of 2.1%, trimmed mean inflation falling to 3.2%yoy & the proportion of CPI items with infl<2%yoy way above those with inflation >3%yoy. If this continues in Oct it could drive a Dec RBA cut.”

China Caixin Manufacturing PMI to Test Investor Optimism About Stimulus

Later in the morning session, China’s crucial Caixin Manufacturing PMI could impact Aussie dollar demand. Economists forecast the Caixin Manufacturing PMI to increase slightly from 49.3 in September to 49.7 in October.

An increase above 50 and expectations of more policy stimulus from Beijing could boost Aussie dollar demand. China accounts for one-third of Australian exports. Increased demand from China may support the Aussie economy, which has a trade-to-GDP ratio of over 50%.

The PMI survey precedes next week’s National People’s Congress Standing Committee (NPCSC) meeting. Markets expect Beijing to announce policy measures to boost consumption.

Australian Dollar Daily Chart

In Friday’s US session, the Jobs Report will also influence buyer demand for the AUD/USD.

A lower US unemployment rate and a spike in nonfarm payrolls could reduce investor bets on a December Fed rate cut, pulling the AUD/USD below $0.65500, a crucial support level.

Conversely, an unexpected rise in the US unemployment rate and less than a 100k increase in nonfarm payrolls may refuel speculation about a December Fed rate cut. A more dovish Fed rate path could drive the AUD/USD to $0.66.