AUD/JPY Break below 97.00, greater fall seems likely due to a possible RBA rates cut

• The AUD/JPY depreciates since the softer data of the Australian CPI have strengthened the case for a possible RBA rate cut in February.
• Australia’s monthly IPC by December 2024 increased a 2.5% year-on-year, remaining within the target range of 2-3% RBA.
• The Japanese yen rises in the midst of the greater probability of a hard line of the Boj.

The AUD/JPY depreciates since the Australian dollar (AUD) falls in front of its peers after the publication of softest data of the Australian consumption price index (CPI) on Wednesday. The crossroads is negotiated around 96.90 during Wednesday’s Asian hours.

Australia IPC inflation softened 2.4% year -on -year in the fourth quarter from 2.8% in the third quarter, also below the 2.5% consensus prognosis. The monthly CPI by December 2024 increased a 2.5% year -on -year, in line with forecasts and above 2.3% in November. This marked the highest reading since August, but remained within the target range of the Bank of the Australian Reserve (RBA) from 2% to 3% per fourth consecutive month.

Inflationary pressures at the end of 2024 have strengthened the case for a possible cut of interest rates by the RBA in February. The Central Bank has maintained the official cash (OCR) rate at 4.35% since November 2023, emphasizing that inflation must “return sustainably” to its target range of 2% -3% before any can be considered Rate cut.

Australian treasurer Jim Chalmers declared that “the worst of the inflationary challenge is well and truly behind us.” Chalmers also emphasized that “the soft landing we have been planning and preparing seems increasingly likely,” according to Reuters.

In addition, the Japanese Yen (JPY) is strengthened in the midst of growing expectations that the Bank of Japan (BOJ) will continue to raise interest rates. The minutes of the December meeting of the Bank of Japan published on Wednesday showed that the members emphasized the need for cautious adjustments in monetary policy.

Meanwhile, investors are more confident that the BOJ will continue their movement towards standardization and make additional increases in interest rates in 2025. Last week, the BOJ reaffirmed its commitment to make more increases in rates and adjustments in its position of Monetary policy If the perspectives presented at the January meeting are developed as expected.