Japanese Yen and Australian Dollar News: Services PMIs and China in Focus

Services PMI: Will an Uptick in Price Fuel BoJ Rate Hike Bets?

On Monday, December 16, Japan’s Jibun Bank Services PMI will likely influence USD/JPY trends ahead of Thursday’s BoJ interest rate decision. Economists expect the Services PMI to rise from 50.5 in November to 51.4 in December. The services sector accounts for over 70% of Japan’s GDP, underscoring the significance of the data.

While a higher reading could retrigger bets on a December BoJ rate hike, price trends will play a pivotal role. Upward trends in input prices could signal higher wages and consumption, suggesting rising inflation. Expectations of a pickup in inflation could drive bets on a 25-basis point December interest rate hike.

In September, Bank of Japan Governor Kazuo Ueda emphasized the significance of services sector price trends, stating,

“October is a month when service price revisions are concentrated in Japan, so we must scrutinize data carefully.”

Other stats include machinery tool orders. However, these will likely play second fiddle to the Services PMI data.

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.”

However, reports suggest the BoJ may delay rate hikes until after the spring wage negotiations (shunto), creating uncertainty about this week’s decision. The uncertainty exposes the USD/JPY to increased sensitivity to crucial economic indicators.

Beyond the data, investors should monitor BoJ commentary for reactions to the Services PMI and insights into the Bank’s monetary policy stance.

Japanese Yen Daily Chart and US Private Sector PMIs: What to Watch

Turning our focus to Monday’s US session, preliminary private sector PMIs will influence USD/JPY price trends. Accounting for over 80% of the US GDP, the services sector data could be crucial as the Fed interest rate decision looms.

Better-than-expected PMI data, including rising employment and prices, could temper bets on multiple Fed rate cuts. A less dovish Fed rate path may drive the USD/JPY pair toward the 156.884 resistance level. Conversely, a slump in the Services PMI may drag the pair toward the 149.358 support level.

AUD/USD in the Spotlight: Private Sector PMIs Support RBA Rate Cut Delay

Much like the USD/JPY, the AUD/USD pair will also be influenced by PMI data and central bank rate expectations,. Key focus areas include labor market strength and China’s economic health.

Australia’s more influential Judo Bank Services PMI slipped from 50.5 in November to 50.4 in December. Accounting for around 80% of Australia’s GDP, steady services sector activity could bolster bets on the RBA delaying rate cuts beyond Q1 2025 RBA.

Price trends also further supported expectations for the RBA to downplay a near-term rate cut. Input prices increased more quickly, with firms citing labor costs as a contributory factor.

However, firms reduced staffing levels contrasting with the latest official labor market data. Australia’s unemployment rate unexpectedly fell from 4.1% in October to 3.9% in November. A looser labor market could lower wages and consumer spending, dampening demand-driven inflation. November’s labor market data sank market bets on a Q1 2025 RBA rate cut.

China’s Economic Data and Its Impact on AUD/USD

China’s industrial production, retail sales, and unemployment figures will also influence the Aussie dollar. House price trends, industrial production, retail sales, and unemployment numbers could give insights into the effectiveness of Beijing’s first set of stimulus measures.

Positive data may signal a pickup in China’s economy, possibly boosting demand for Aussie exports. As China represents one-third of Australia’s export market, its economic health remains crucial to the Aussie economy.

On December 10, RBA Governor Michele Bullock discussed China’s importance, stating,

“US moves against China could affect Aussie trade terms with China, potentially impacting the Aussie economy.”

Explore detailed AUD/USD trends and trade data insights by clicking here.

Australian Dollar Daily Chart

In Monday’s US session, the S&P Global Services PMI could further impact AUD/USD trends. Upbeat services sector data could signal a hawkish Fed rate cut, signaling a narrower-than-expected US-Australia interest rate differential.

A more hawkish Fed rate path could drag the AUD/USD below the $0.63623 support level. A fall through the $0.63623 support level may bring the lower trend line into play.

Conversely, weaker-than-expected US data drive the AUD/USD toward the upper trend line. A break above the upper trend line would bring the 50-day EMA into play.

Global Market Trends: Expert Insights for Traders

Amid global monetary policy shifts, staying informed on economic trends is vital. Traders should closely monitor data releases and expert commentary to refine their strategies in volatile markets. Click here for a detailed analysis of USD/JPY and AUD/USD trends.