Japanese Yen and Australian Dollar News: Will Tankan Data Deter a BoJ Rate Hike?

Tankan Surveys in Focus: Will Q4 Data Shape the BoJ’s Path?

On Friday, December 13, the Bank of Japan’s Tankan surveys are set to impact USD/JPY and influence the looming BoJ interest rate decision. Two critical data sets will likely draw significant scrutiny as markets try to second-guess the BoJ’s next move.

Services Sector: A Key Driver of the BoJ’s Decision

Economists expect the Tankan Large Non-Manufacturing Index to drop from 34 in Q3 2024 to 32 in Q4 2024. The services sector accounts for over 70% of Japan’s economy, with demand and price trends crucial to the BoJ.

Weaker-than-expected numbers could temper bets on a December BoJ rate hike. Conversely, an unexpected jump in the Non-Manufacturing Index could bolster expectations of a December move.

Manufacturing Sentiment: Implications for BoJ Hawks

The Tankan Large Manufacturing Index, another focal point, is expected to slip from 13 in Q3 2024 to 12 in Q4 2024. A larger-than-expected decline may suggest weakening demand, potentially pressuring the BoJ to reconsider any plans for multiple near-term interest rate hikes.

BoJ Governor Ueda’s Take: Hawkish or Cautious?

BoJ Governor Kazuo Ueda recently noted that inflation and the economy align with the Bank’s projections, hinting at a December policy maneuver. The BoJ hawks may face stern resistance if the Tankan surveys signal a sharp deterioration in business sentiment across the private sector. On the other hand, improving sentiment could green-light a 25-basis point hike.

Recent data on wage growth, household spending, and inflation has already supported the case for a December move, briefly dragging the USD/JPY below 150.

Expert Views on the Bank of Japan Rate Path

Seabridge Gold Investor, which tracks factors driving metal prices, remarked on recent economic data, saying,

“The Bank of Japan was given another reason to hike rates in a few weeks after October base pay came out, and it rose 2.7% y/o/y, up from 2.5% in the month before, and that is the fastest rate since 1992. The Trump Administration may get some help with a lower dollar.”

Japanese Yen Daily Chart and US Export Prices: What to Watch

Turning our focus to Friday’s US session, export price data could influence US dollar demand. Falling export prices could indicate weaker demand for US goods, potentially pulling the USD/JPY pair toward the 149.358 support level.

US exports contribute around 10% to GDP, giving insights into the US economy. However, better-than-expected data could drive the USD/JPY toward the 156.885 resistance level.

While export price trends will likely influence US dollar demand, they are unlikely to affect next week’s Fed interest rate decision. Recent labor market and inflation data have cemented bets on a 25-basis point December Fed rate cut.

AUD/USD in the Spotlight: China’s Role in Aussie Trends

Shifting the focus to another key currency pair, AUD/USD will be in the hands of Beijing and stimulus and monetary policy measures, aiming to boost domestic consumption.

China’s President Xi Jinping and senior policymakers attended China’s Central Economic Work Conference (CCEW) this week. This followed China’s Politburo announcing plans to loosen monetary policy and target consumption and broader domestic demand. The CCEW shared detailed plans for 2025 on Thursday.

More granular details of the Politburo’s stimulus plans, targeting consumption and demand, could fuel Aussie dollar demand. A pickup in domestic consumption may enhance Aussie trade terms as China accounts for one-third of Aussie exports.

Rising demand for Australian goods would bolster the Australian economy, which has a trade-to-GDP ratio above 50%. Furthermore, improving trade terms could further tighten the Australian labor market as 20% of its workforce is in trade-related jobs.

RBA Governor Michele Bullock underscored China’s importance, stating,

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

Australia’s Labor Market: Impacts on Monetary Policy

Improving trade terms and tighter labor market conditions would likely temper bets on a Q1 2025 RBA rate hike, driving the AUD/USD pair toward $0.65. Australia’s unemployment rate unexpectedly dropped from 4.1% in October to 3.9% in November. The labor market data reduced investor expectations for a Q1 2025 RBA rate hike.

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

Australian Dollar Daily Chart

In Friday’s US session, export prices could further influence AUD/USD trends. Weaker-than-expected export prices may support bets on multiple Fed rate cuts, narrowing the US-Australia interest rate differential. With markets pushing back on a Q1 2025 RBA rate cut, a more dovish Fed rate path could drive the AUD/USD pair toward the upper trend line and the 50-day EMA.

Conversely, better-than-expected US data may drag the AUD/USD toward the $0.63623 support level.

Global Market Trends: Expert Insights for Traders

With global monetary policy in flux, understanding key economic trends is critical. Explore here for expert forecasts to stay ahead of market shifts and refine your trading strategies.