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On the other hand, the US dollar index consolidated near 103.80, and it is struggling for the sixth straight day as economic concerns persist. Weak US employment data in February reinforced expectations of multiple Federal Reserve rate cuts. Nonfarm Payrolls grew by 151,000, falling short of the projected 160,000, while January’s figures were revised lower to 125,000 from 143,000. Investors expect that the Fed will cut interest rates by 75 basis points this year, with the first reduction expected in June. Meanwhile, US Commerce Secretary Howard Lutnick confirmed that the 25% tariffs on steel and aluminum, introduced in February by President Trump, will proceed as planned on Wednesday.
RBA Deputy Governor Andrew Hauser highlighted that global trade risks are at their highest in 50 years, warning that prolonged uncertainty may delay investment decisions. China’s Consumer Price Index dropped 0.7% year-over-year in February, exceeding the expected 0.5% decline and reversing January’s 0.5% increase. Moreover, the monthly inflation stood at -0.2%, which was softer than forecasted -0.1% and down from January’s 0.7%. Fed Chair Jerome Powell reassured investors that no immediate monetary policy shifts are necessary. However, AUD/USD remains uncertain as ongoing trade conflicts and economic uncertainty continue to shape market sentiment.
Japanese Yen Gains as Safe-Haven Demand Rises
The Japanese Yen strengthens as investors seek safe-haven assets, pushing USD/JPY lower for the second straight day. The pair trades at 147.01 and remains under a bearish trend. Japan’s Q4 GDP data indicates economic growth of 2.2% on an annualized basis despite a slowdown in expansion. The data complicates the Bank of Japan’s plans for future rate hikes, but it still supports the Yen. A risk-off mood in global markets adds further pressure on USD/JPY as investors anticipate cautious monetary policy decisions from the Federal Reserve.
The chart below shows that Japan’s economy grew by 0.6% quarter-over-quarter in Q4 2024. This was slightly below the flash estimate of 0.7% but higher than Q3’s 0.4% expansion. Private consumption remained flat after being revised down from a 0.1% gain. Meanwhile, business investment rose by 0.6%, surpassing the expected 0.3% increase. Furthermore, government spending expanded for the fourth consecutive quarter, growing by 0.4%, up from the previous estimate of 0.3%. As economic uncertainties persist, the stronger Yen continues to weigh on USD/JPY, reflecting cautious market sentiment.
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