AUD/JPY breaks below 97.00, further downside appears due to potential RBA rate cut

AUD/JPY depreciates as softer Australian CPI data has strengthened the case for a potential RBA rate cut in February.
Australia’s Monthly CPI for December 2024 increased by 2.5% YoY, remaining within the RBA target range of 2-3%.
The Japanese Yen rises amid the increased likelihood of the BoJ’s hawkish policy outlook.

Akhtar Faruqui FXStreet

AUD/JPY depreciates as the Australian Dollar (AUD) falls against its peers following the release of softer Consumer Price Index (CPI) data from Australia on Wednesday. The currency cross trades around 96.90 during the Asian hours on Wednesday.

Australia’s CPI inflation eased to 2.4% year-over-year in Q4 from 2.8% in Q3, also below the consensus forecast of 2.5%. Monthly CPI for December 2024 increased by 2.5% year-over-year, in line with forecasts and up from November’s 2.3%. This marked the highest reading since August but remained within the Reserve Bank of Australia’s (RBA) target range of 2% to 3% for the fourth consecutive month.

The easing inflationary pressures at the end of 2024 have strengthened the case for a potential interest rate cut by the RBA in February. The central bank has held the Official Cash Rate (OCR) steady at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any rate cut can be considered.

Australian Treasurer Jim Chalmers stated that "the worst of the inflation challenge is well and truly behind us." Chalmers further emphasized that "the soft landing we have been planning and preparing for is looking more and more likely," according to Reuters.

Moreover, the Japanese Yen (JPY) strengthens amid increasing expectations that the Bank of Japan (BoJ) will continue raising interest rates. Minutes of the December Bank of Japan meeting released this Wednesday showed that members emphasized the need for cautious monetary policy adjustments.

Meanwhile, investors are more confident that the BoJ will continue its move toward normalization and deliver additional interest rate hikes in 2025. Last week, the BoJ reaffirmed its commitment to further rate hikes and adjustments to its monetary policy stance if the outlook presented at the January meeting unfolds as expected.

Economic Indicator

Monthly Consumer Price Index (YoY)

The Monthly Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, measures the changes in the price of a fixed basket of goods and services acquired by household consumers. The indicator was developed to provide inflation data at a higher frequency than the quarterly CPI. The YoY reading compares prices in the reference month to the same month a year earlier. A high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.

GBP/USD flirts with weekly highs in the Fed's aftermath

GBP/USD reversed early losses following the Federal Reserve decision to keep rates on hold and neared the 1.3360 level before shedding some ground. Focus shifts to Governor Kevin Warsh's speech, while the Bank of England will announce its monetary policy decision on Thursday.

EUR/USD extends rally pass 1.1450 on Fed's Warsh

EUR/USD trades at fresh weekly highs above 1.1450, following the Federal Reserve monetary policy decision to keep interest rates on hold. The statement showed policymakers remain confident in economic progress while blaming inflation on energy prices. The divided vote among officials put in doubt a September hike, leading to sharp US Dollar losses.

Gold hovers around $4,100 as Fed decision hits the USD

Gold surged following the Federal Reserve's decision to keep the benchmark interest rate unchanged at 3.50%-3.75%. Policymakers noted that inflation remains elevated and that economic activity is expanding at a solid pace despite elevated uncertainty, spurring doubts about a rate hike in September. XAU/USD peaked above $4,100, now battling to retain the level.

No soft target: Warsh vows to return inflation to 2%

The Fed left interest rates unchanged at 3.50%-3.75%, but the decision carried a distinctly hawkish edge as three officials voted for an immediate 25-basis-point increase. Chair Kevin Warsh reinforced that message, insisting there was no tolerance for a softer inflation target and warning that the Fed would not hesitate to act.

How the CLARITY Act unlocks Wall Street’s tokenization pipeline

The United States (US) Digital Asset Market Clarity Act (CLARITY Act), awaiting a full Senate floor vote, promises to unlock Wall Street’s potential to tokenize financial assets, including equities, US Treasuries, private credit, real estate and commodities at a scale that could supercharge the real-world asset (RWA) market from the current $17 billion level to $5.5 trillion by 2030, according to

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.