On March 31, market attention turns to Japanese retail sales and industrial production data, influencing expectations for Bank of Japan rate hikes. Meanwhile, China’s NBS Manufacturing PMI will have implications for the Australian dollar, alongside potential tariff impacts between the US and Australia. Economic indicators from both regions are set to shape market trends.

On March 31, focus will fall on retail sales and industrial production affecting the USD/JPY currency pair and the Bank of Japan’s (BoJ) policies. Economists predict a 2% rise in retail sales year-on-year for February, a decrease from 3.9% in January. A disappointing figure could lessen expectations for BoJ rate hikes, as weakened consumer spending may reduce inflationary pressures. Conversely, an unexpected increase could suggest rising wages are driving consumption, supporting a potentially hawkish outlook for the BoJ.

Similarly, industrial production is expected to increase by 2.3% month-on-month in February, rebounding from a 1.1% decline in January. This improvement might indicate that companies are preparing for anticipated US tariffs. However, markets could regard February’s statistics with caution, anticipating that the figures for April will have a more substantial impact on demand for the Japanese Yen.

Despite possible retail sales weaknesses, elevated wage growth may maintain BoJ rate hike expectations. Global Markets Investor recently noted the potential for a May rate hike, citing average monthly wage increases of 3.1%, the highest in 32 years. This acceleration, underpinned by rising inflation, may prompt the BoJ to act sooner than expected, nudging up demand for the Yen.

For the USD/JPY pair, investors should also pay attention to the Dallas Fed Manufacturing Index and the Chicago PMI during the US session, as these will provide further insights into domestic demand. Aside from economic reports, developments regarding tariffs and commentary from Federal Open Market Committee (FOMC) members are expected to significantly steer USD/JPY fluctuations.

Turning to the AUD/USD outlook, the economic health of China strongly influences market sentiment and demand for commodity-linked currencies. A higher reading in the NBS Manufacturing PMI would signal improved demand, likely boosting the Australian dollar as China represents a significant portion of Australian exports. Conversely, a decline in the PMI may imply reduced demand, impacting the Aussie dollar negatively.

With Australia’s trade-to-GDP ratio exceeding 50%, Chinese manufacturing data holds substantial import. Nonetheless, growing concerns regarding US tariffs may limit any positive outcomes from affirming Chinese economic signals on the Aussie dollar. Following the introduction of a 25% tariff on US vehicle imports, market participants remain alert to any reciprocal measures that might escalate trade tensions, fostering a dovish approach from the Reserve Bank of Australia (RBA).

In light of this, RBA Governor Michele Bullock remarked in February, “Global trade uncertainties and tariff threats remain unpredictable, with economic impacts dependent on implementation and market reactions.”

During the US session, strong economic indicators could mitigate expectations of multiple Fed rate cuts, resulting in a more hawkish outlook that may favor the US dollar. In such a case, the AUD/USD could decline toward $0.62500. Conversely, weaker economic data may spark concerns regarding the US economy, favoring a dovish Fed stance and potentially lifting the AUD/USD above the 50-day EMA while targeting the $0.63623 resistance level.

Lastly, ongoing updates regarding tariffs will be crucial, as escalations in the trade war may lead to increased demand for US dollars, thus suppressing the AUD/USD pair and pushing it below the $0.62500 mark. The primary factors influencing the forex market today include: retail sales, industrial production, global trade sentiments, and economic indicators from both the US and China.

In summary, the Japanese Yen and Australian Dollar are both facing significant influences from upcoming economic data. The retail sales and industrial production figures in Japan may sway BoJ policy, while China’s economic performance continues to be pivotal for the Australian dollar. Market participants should remain vigilant regarding tariff updates and data releases to navigate these currencies effectively.

Original Source: www.fxempire.com

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