Japanese Yen and Aussie Dollar News: Geopolitics and US Retail Sales in Focus

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AUD/USD: Is an RBA Rate Cut Next Week Already Priced In?

For the Australian dollar, RBA rate cut speculation will influence AUD/USD trends on February 14. Unlike the BoJ, markets expect the RBA to cut the cash rate by 25 basis points on February 18.

Aussie inflation data has fueled speculation of multiple H1 2025 RBA rate cuts, capping the upside for the AUD/USD pair even as US dollar demand wanes due to easing  geopolitical risks.

Australian consumer inflation expectations rose to 4.6% in February, up from 4.0% in January. Despite the upswing, the broader trend remains downward, aligning with the recent pullback in the RBA’s trimmed mean CPI. The RBA Trimmed Mean CPI rose 3.2% year-on-year in Q4 2024, down from 3.6% in Q3 2024, approaching the central bank’s 2-3% target range.

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, commented on the consumer inflation expectation data, stating:

“Australian consumer inflation expectations ticked up in February but with the trend remaining down.”

Additionally, an escalation in the US-China trade war could further influence RBA policy decisions and forward guidance. In December, RBA Michele Bullock highlighted China’s role in the Australian economy, stating:

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

China’s influence on the Aussie economy exposes the AUD/USD to US-China tariff developments. Hopes of the US and China avoiding a full-blown trade war could boost near-term Aussie dollar demand, potentially pushing the AUD/USD pair higher. However, expectations of multiple RBA rate cuts remain an Aussie dollar headwind.

Conversely, an escalation in the US-China trade war may drag the AUD/USD pair below $0.63.

For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.

Australian Dollar Daily Chart

Heading into the US session, retail sales data could influence Fed rate expectations, impacting AUD/USD price action.

Stronger-than-expected retail sales could support a more hawkish Fed stance. Fading bets on a Fed rate cut in 2025 would widen the US-Australia interest rate differential in favor of the US dollar. In this case, the AUD/USD pair may drop below the 50-day EMA, bringing $0.62500 into play.

Conversely, a softer retail sales reading may narrow the interest rate differential, potentially driving the pair toward the $0.63623 resistance level.