The Australian dollar fell in European trade on Wednesday on track for the fourth straight loss against the US dollar, plumbing two-week lows after forecast-missing inflation data from Australia.

The data showed inflation has stabilized within the Reserve Bank of Australia’s targets in the medium term, raising the prospects of a rate cut in April.

The Price

The AUD/USD fell 0.35% to 0.6320, the lowest since February 14, with a session-high at 0.6354.

The pair lost 0.1% yesterday against the dollar on renewed concerns about Donald Trump’s tariffs.

Australia’s Inflation

Australia's consumer prices rose 2.5% y/y in January, same as December and below estimates of 2.6%. 

Inflation remains firmly nestled within the 2-3% RBA target in the medium term, boosting the odds of an RBA rate cut in April.

Australian Rates

Following the data, the odds of an RBA interest rate cut in April surged from 20% to 40%, and the odds of a May rate cut settled at 100%.

Now traders await important data on Australian inflation, unemployment, and wages.

The yen fell in Asian trade on Wednesday against a basket of major rivals, giving up four-month highs against the dollar on profit-taking, as investors shun new positions ahead of data that would present clues on upcoming Japanese interest rate decisions.  

The yen is also pressured by higher US 10-year treasury yields as Trump prepares to enforce his tariffs on Canada and Mexico, raising inflationary pressures on the Federal Reserve.

The Price

The USD/JPY pair rose 0.35% today to 149.55 yen per dollar, with a session-low at 148.61.

The yen rose 0.45% on Tuesday, with a four-month high at 148.56 following strong Japanese services data for January.

Japanese Rates

Earlier Tokyo data showed services prices rose 3.1% in January, the fastest since June 2024, and up from 3.0% in December.

Japan’s GDP growth accelerated in the fourth quarter of last year, in turn raising pressures on BOJ policymakers.

Bank of Japan member Hajimi Takata asserted the importance of gradual interest rate hikes to contain the risks of inflation, which is approaching the 2% target.

BOJ Vice Governor Riyuzu Himuno said the path of monetary policies will depend on data, especially wages growth in both 2024 and 2025.

Following the data, the odds of a BOJ March interest rate hike rose by 0.25% at the March meeting to 80%.

US Yields

US 10-year treasury yields rose 0.7% on Wednesday away from 11-week lows at 4.283%, on track for the first profit in six sessions.

As Trump prepares to enforce his tariffs on Mexico and Canada next week, inflationary pressures are expected to mount on the Federal Reserve, which would likely lead to interest rates being held at current levels for an extended duration this year.

Australia's consumer prices rose 2.5% y/y in January, same as December and below estimates of 2.6%. 

Most US stock indices, except the Dow, lost ground on Tuesday, marking the fourth daily decline in a row as the trade war flares up and after weak data.

Trump surprised the markets with plans to enforce the tariffs on Canadian and Mexican imports next month, shrugging off recent negotiations.

Now markets await Nvidia’s earnings results tomorrow to gauge the spending and outlook of AI investments. 

The Conference Board survey showed the US consumer confidence index fell by 7 points to 98.3 points, missing estimates of 102.7.

At the close, Dow Jones was up 0.4%, or 160 points to 43621 points, with a session-low at 43,283 points.

S&P 500 fell 0.5%, or 28 points to 5955 points, with a session-low at 5908 points.

NASDAQ swooned 1.4%, or 260 points to 19,026 points, with a session-low at 18,871 points.