- AUD/JPY rose as Australia Composite PMI revised upward to 50.2 in December, from the previous reading of 49.9.
- The Caixin China Services PMI increased to 52.2 in December, up from the previous reading of 51.5.
- Japan’s composite and services PMIs for December were revised downward, bolstering a dovish stance on the BoJ policy outlook.
AUD/JPY continues to gain ground for the third consecutive day, trading around 98.50 during the European hours on Monday. This upside of the AUD/JPY cross is attributed to the improved Australian Dollar (AUD) following the release of the Judo Bank Australia Purchasing Managers' Index (PMI) and the Caixin Services PMI for China. Given their close trade relationship, fluctuations in China’s economy often have a notable impact on Australian markets.
The Judo Bank Australia Composite PMI for December 2024 was revised upward to 50.2 from an earlier reading of 49.9, signaling a third consecutive month of modest growth in private sector output. This growth was primarily driven by the services sector, while manufacturing output continued to contract. The Services PMI was also revised higher to 50.8 from 50.5 in November, representing the eleventh consecutive month of expansion in the services sector.
In China, the Caixin Services PMI increased to 52.2 in December 2024, up from 51.5 in November, surpassing market expectations of 51.7. This marks the fastest growth in the Chinese services sector since May, reflecting robust performance.
On Monday, Reuters reported that the Shanghai Stock Exchange has committed to deepen capital markets opening during a meeting with foreign institutions. China’s economy is underpinned by solid fundamentals and demonstrates resilience amid a complex global environment.
In Japan, composite and services PMIs for December were revised lower, reinforcing a dovish outlook on the Bank of Japan’s (BoJ) policy and exerting downward pressure on the Japanese Yen (JPY). The Jibun Bank Japan Services PMI was revised down to 50.9, falling short of the anticipated 51.4. Despite the downward revision, the reading improved from November’s 50.5, marking the second straight month of growth and the fastest pace since September.
Meanwhile, the Jibun Bank Japan Composite PMI rose to 50.5 in December from 50.1 in November, marking the second consecutive month of growth. While indicative of only marginal expansion, this was the strongest reading in three months. The increase was driven by modest growth in the services sector, alongside a softer contraction in manufacturing output.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD tests daily lows near 1.0350 on NFP
The buying bias in the Greenback gathers extra pace on Friday after the US economy created fewer jobs than initially estimated in January, dragging EUR/USD to the area of new lows near 1.0350.
GBP/USD flirts with daily lows near 1.2420, Dollar picks up pace
The continuation of the rebound in the US Dollar motivates GBP/USD to accelerates its losses and revisit the 1.2420 area, or daily lows, following the release of US NFP in January.
Gold tests fresh lows near $2,860 after NFP
Gold prices trim their early advance on Friday, deflating to the vicinity of the $2,860 region per ounce troy following the publication of the US labour market report in January.
Key takeaways from the January Payrolls report
The January payrolls number was weaker than expected at 143k, vs a reading of 175k. However, to counteract the downside surprise in the NFP number, the unemployment rate fell to 4% from 4.1%, and average wage data jumped by 0.5% on the month, to 4.1%, the market had been looking for a decline to 3.8%.
Top Trumps: The global economy’s House of Cards
The year has barely started and we are learning the hard way what Donald Trump’s second term in office means for markets, analysts and global policymakers. It's like living through an episode of the political thriller, House of Cards.
The Best Brokers of the Year
SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.