Japanese Yen and Aussie Dollar Forecasts: Services PMI Test and Aussie Inflation in Focus

Japanese Services PMI Puts BoJ and Yen in the Spotlight

Traders brace for a crucial USD/JPY session, with Services PMI data likely to influence the Bank of Japan’s policy stance. Currently, October is the base case for a rate hike, with December a potential fallback.

Economists forecast the S&P Global Services PMI to increase from 53.1 in August to 53.4 in September.

A higher PMI reading could signal a pickup in momentum, given that the services sector accounts for around 70% of Japan’s GDP. An improving economic backdrop may raise bets on an October BoJ rate hike, lifting demand for the yen. Conversely, an unexpected drop in services sector activity may dampen expectations of an October policy adjustment, potentially weighing on the yen.

While the headline PMI will influence sentiment, traders should consider the employment and price sub-components. Rising prices and a higher job creation rate could fuel inflation, supporting a more hawkish BoJ policy stance. On the other hand, steady services sector activity, falling services sector inflation, and job cuts may push back a BoJ rate hike until December, the fallback scenario.

East Asia Econ recently commented on the inflation outlook, after August’s inflation numbers, stating:

“I thought Japan’s inflation might be peaking, but relative to that expectation, the data in August were strong. Overall, core and core services might be picking up again.”

Fed Speakers in Focus

Later Wednesday, FOMC members’ speeches could influence demand for the US dollar and the USD/JPY pair. Hawkish rhetoric, calling for delays to further rate cuts until inflation softens, could send USD/JPY toward 148, bringing the 149.358 resistance level into play.

On the other hand, rising support for rate cuts in October and December would likely weigh on the US dollar. A more dovish Fed policy stance could push USD/JPY toward 145.

USD/JPY Scenarios: Hawkish BoJ vs. Dovish Fed Risks

• Bearish USD/JPY Scenario: Hawkish BoJ cues or dovish Fed signals could push USD/JPY toward 145.
• Bullish USD/JPY Scenario: Dovish BoJ signals or hawkish Fed chatter could send the pair toward 149.358.

Read the full USD/JPY forecast, including chart setups and trade ideas.

The yen is not the only currency facing potential policy shifts. Inflation numbers from Australia could fuel speculation about a November rate cut, spotlighting the AUD/USD pair.

Aussie Inflation and the RBA in Focus

Turning focus to the AUD/USD pair, the Aussie Monthly CPI Indicator could influence the RBA rate path. Economists forecast the annual inflation rate to increase from 2.8% in July to 2.9% in August, nearing the upper band of the RBA’s 2-3% target range.

Hotter-than-expected inflation numbers may temper bets on a November RBA rate cut, boosting demand for the Aussie dollar. Conversely, a softer inflation reading could support a November rate cut and expectations of further policy easing in early 2026.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Weaker Aussie inflation or dovish RBA policy signals may push AUD/USD toward $0.655.
• Bullish AUD/USD Scenario: Hotter Aussie inflation or hawkish RBA chatter could drive AUD/USD toward $0.665.

See our full AUD/USD analysis for detailed trends and trade setups.

Fed Signals and Rate Differentials

Economists expect the RBA to cut rates in November, with further cuts possible in February and May. The RBA’s monetary policy outlook could hinge on the Fed’s rate path, underscoring the importance of tracking FOMC members’ speeches for forward guidance.

Dovish Fed rhetoric may boost expectations of multiple rate cuts in the fourth quarter. Multiple Fed rate cuts could narrow the US-Australia rate differential, favoring the Aussie dollar. A narrower rate differential may drive AUD/USD toward $0.665.

Conversely, hawkish Fed chatter, calling for a pause in Fed rate cuts, may widen the rate differential in favor of the US dollar. A widening rate differential may push AUD/USD toward $0.655, exposing the $0.650 support level.

Economist Views on the Fed’s Effect on the RBA

This week, Dr. Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, commented on the potential influence of the Fed’s policy adjustments on the RBA, stating:

“Money markets now see the Fed cutting by more than the RBA which will push US short term rates below the RBA’s cash rate. Historically, a rising gap between Australian and US rates has tended to see a rising trend in the $A. So far the rise in the $A is trivial but if it heads significantly higher it may add pressure on the RBA to cut by more than the market is expecting because a rising $A will dampen growth and inflation.”

Dr. Oliver concluded:

“And if the Fed continues to cut because of a weakening US jobs market it may also add to pressure for more rate cuts here as weaker US growth will impact global and Australian growth. Our base case remains for 0.25% RBA rate cuts in November, February and May.”

Key Market Drivers to Watch Today:

• USD/JPY: Watch BoJ signals and Services PMI data.
• USD/JPY and AUD/USD: Track FOMC members’ speeches.
• AUD/USD: Consider Aussie inflation and RBA commentary.

For more in-depth analysis, review today’s USD/JPY and AUD/USD trading setups in our latest reports and consult the economic calendar.