Yen Gains as Japan Inflation Surprises; 🇦🇺 Aussie Dollar Eyes Trade Tensions and Fed Signals
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USD/JPY dips as Japan’s inflation overshoots expectations, raising BoJ rate hike bets. Meanwhile, AUD/USD reacts to RBA recession warnings amid US-China trade uncertainty. Read today’s detailed forecast.
🔺 Japanese Yen Strengthens on Hot Inflation Data and BoJ Rate Hike Hopes
The Japanese Yen (JPY) edged higher on Friday, May 23, after national inflation figures reignited bets that the Bank of Japan (BoJ) may raise rates in Q3 2025. Headline inflation rose to 3.5%, up from 3.2%, while core inflation climbed to 3.0%, well above the BoJ’s 2% target.
These numbers pushed the USD/JPY pair to session lows of 143.810, down from 143.899, as traders responded to the possibility of a more hawkish BoJ.
Analysts believe a US-Japan trade deal in Q2 could accelerate a BoJ policy shift.
However, economists surveyed by Reuters remain cautious:
- 95% expect no rate change at the June BoJ meeting
- 67% forecast no hike in Q3 2025
- Only 52% expect a hike in 2025
Policymakers are expected to weigh global tariffs and economic uncertainty before tightening policy further.
📊 USD/JPY Outlook: Eyes on Fed Speakers and U.S. Housing Data
Later today, markets will monitor:
- US new home sales (expected to drop 4.7% in April)
- Fed speeches, which could shift interest rate expectations
| Bullish USD/JPY Scenario | Strong housing data + Hawkish Fed → Potential rise to 145.00 |
|---|---|
| Bearish USD/JPY Scenario | Weak home sales + Dovish Fed → Drop toward 142.35 support |
If data weakens, USD/JPY could revisit the May 6 low of 142.350. Conversely, positive surprises may lift the pair toward the 50-day EMA near 145.
📌 Read full USD/JPY forecast and chart analysis
🌏 AUD/USD Faces Headwinds as RBA Warns of US-China Trade Fallout
The Australian Dollar (AUD) remains sensitive to global trade developments, particularly after RBA Governor Michele Bullock warned that a US-China trade war could push Australia into recession.
“Australia’s economy could easily be compromised if tensions escalate,” she noted, hinting at possible rate cuts to buffer downside risks.
Despite a 0.43% gain, AUD/USD remains vulnerable. China is Australia’s largest export partner, and any deterioration in trade flows could significantly impact the Aussie.
🔍 AUD/USD Technical Outlook: Trade Tensions vs. Stimulus Hopes
| Bullish AUD/USD Scenario | De-escalation in trade war + China stimulus → Test $0.6500–$0.6514 |
|---|---|
| Bearish AUD/USD Scenario | Renewed friction + RBA dovishness → Slide to $0.6362 or lower |
AUD/USD is currently testing the 200-day EMA, with upward potential if US data weakens or Chinese stimulus boosts commodity demand.
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