The AUD/JPY currency pair has retraced some of its previous losses, hovering around 98.00 during the early European trading on Monday. But its upward potential appears limited, as the Australian dollar faces headwinds. There’s a growing possibility that the Reserve Bank of Australia (RBA) will initiate rate cuts as soon as February, spurred by signs of an economic slowdown. The National Australia Bank (NAB) also flagged this prospect, while maintaining its original forecast of a rate cut in May 2025. Their report anticipates a quarterly trimmed mean inflation of 0.6% in Q4, with a continuous decline towards 2.7% by the end of 2025.
In Japan, Friday’s robust National Consumer Price Index (CPI) data has fanned speculation of a potential interest rate hike by the Bank of Japan (BoJ) in January or March. Year-on-year inflation hit 2.9% in November, up from 2.3% in October, and the annual core inflation rate climbed to 2.7%, surpassing market forecasts. Nevertheless, traders are still cautious. The BoJ has held its policy rate steady for three consecutive meetings, keeping it within the 0.15% – 0.25% range, as expected.
With the release of the meeting minutes from both the RBA and the BoJ scheduled for Tuesday, traders are on tenterhooks. These documents could offer valuable insights into the central banks’ future monetary policy directions, which will in turn impact the fate of the AUD/JPY pair.
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