Japanese Yen and Australian Dollar News: Key Aussie and China Data in Focus

USD/JPY: BoJ Rate Hike Speculation to Dictate Trends

On Monday, January 13, market speculation about a January Bank of Japan rate hike will influence the USD/JPY pair. The BoJ recently stated that labor shortages have forced Japanese firms to continue raising wages ahead of the Spring wage negotiations (Shunto).

Higher wages could counter the effects of a weaker Japanese Yen on import prices and living costs, potentially boosting household spending. Increased spending could fuel demand-driven inflation, enabling the BoJ to hike rates.

Prior to the wage growth data, Bank of Japan Governor Kazuo stated that the Bank needs more wage data before making a move.

Recent wage growth data aligned with firms raising wages, with base pay rising at the fastest pace in over 30 years.

Amid speculation about the timing of a BoJ rate hike, traders should monitor BoJ chatter. Insights into wage growth, the economic outlook, and monetary policy will impact the USD/JPY pair. In December, a Reuters poll revealed that analysts expect the BoJ to lift interest rates to 0.5% in Q1 2025.

Expert Views on Japan’s Economy and the BoJ’s Rate Path

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero recently discussed wage growth trends and the BoJ’s policy outlook, stating,

“Nominal wages experienced the highest growth rate since 1992 at +2.7% YoY in October, which lifted real wages to +0.1% YoY (Chart 1). Furthermore, services CPI inflation excluding imputed rent picked up to +2.2% YoY in October from +1.9% YoY in September. These results indicate that companies are transferring their higher labor costs to customers, which should be an encouraging development for the BoJ.”

USD/JPY Trends: US Inflation in Focus

Shifting our focus to the US session, consumer inflation expectations may influence the USD/JPY pair further.

Higher consumer inflation expectations may encourage spending, fueling demand-driven inflation. Consumers bring forward spending plans if they expect prices to rise. A higher inflation outlook could support a more hawkish Fed rate path, potentially driving the USD/JPY toward 160.

Conversely, weaker inflation expectations may raise March Fed rate cut bets, dragging the USD/JPY below the 156.884 support level.

Investors should also track FOMC member speeches for insights into the US labor market, inflation, and monetary policy. These factors could influence US dollar demand.

AUD/USD: Labor Market and Inflation Key to Trends

In the case of the Australian dollar, labor market and inflation data will influence the AUD/USD pair. Economists expect Australia’s ANZ-Indeed Job Ads to rise 0.3% in December after sliding 1.3% in November.

Stronger job ads could signal an improving labor market and rising wages. Wage growth may fuel consumer spending and demand-driven inflation, potentially delaying an RBA rate cut. However, an unexpected fall in job ads may boost February rate cut bets ahead of Thursday’s crucial unemployment data.

Meanwhile, the TD-MI Inflation Gauge also requires consideration. Economists predict inflation to increase by 0.2% in December, similar to November’s trend. As a leading consumer price indicator, hotter-than-expected inflation data could temper bets on a February RBA rate cut. On the other hand, softer inflation figures would support a more dovish RBA rate path.

China Trade Data and the Australian Economy

Investors should also consider China’s trade data for insights into demand. Weaker-than-expected exports and a further pullback in imports could signal waning global trade terms. Softer demand from China could affect the Aussie economy given its reliance on China. Australia has a trade-to-GDP ratio of over 50%, with China accounting for one-third of its 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, US inflation figures may affect the US-Aussie interest rate differential ahead of Wednesday’s crucial US CPI Report.

Expectations for a February RBA rate and a more hawkish Fed rate path could widen the interest rate differential in favor of the US dollar. This may drag the AUD/USD pair toward the lower band of the descending channel. However, softer inflation data may drive the pair toward the upper trend line and the $0.63 mark.

Global Market Trends: A Trader’s Guide

Central bank policies will continue to drive volatility in early 2025 for the AUD/USD and USD/JPY pairs. Key factors include upcoming BoJ and RBA meetings, inflation trends, and labor market data. Broader themes, including US trade policies and China’s stimulus measures, may also influence global market trends.

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