Aussie dollar declines following weak economic data from China
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AUD/JPY fell to 103.15 in early European trade on Monday, retreating from recent highs as weaker Chinese economic data pressured the Australian dollar. The decline reflects a deepening slowdown in China during November, which typically weighs on the Aussie due to Australia’s strong trade ties with its largest export market. China’s National Bureau of Statistics[1] reported that retail sales growth slowed to 1.3% year-on-year in November, down from 2.9% in October and below expectations[2]. Industrial production rose 4.8% year-on-year, also missing forecasts. These weaker results underscore ongoing challenges in domestic demand and manufacturing, reducing confidence in China-linked currencies. Despite recent weakness, the broader technical outlook for AUD/JPY remains positive. The pair continues to trade above its 100-day exponential moving average, maintaining the medium-term uptrend. Momentum indicators, including the Relative Strength Index, remain supportive, indicating the latest dip may be a consolidation rather than a reversal. Focus now shifts to Japan, as markets await the Bank of Japan’s[3] (BoJ) policy decision later this week[4]. Growing expectations of a rate hike[5] may support the yen and limit near-term gains in AUD/JPY. Currently, the AUD/JPY exchange rate is consolidating within its established uptrend, balancing weaker Chinese data with supportive technical signals and upcoming central bank decisions.
USD/CAD weakens as traders reassess Fed outlook for next year
The USD/CAD pair remained under pressure near 1.3750 in late Asian trading on Monday, approaching a three-month low. The pair is weighed down by a weaker US dollar and investor uncertainty about the Federal Reserve’s (Fed) policy[6] path through 2026.
The US Dollar Index traded near an eight-week low, reflecting increased expectations for lower US rates in the coming years. The CME FedWatch tool[7] indicates that markets anticipate several rate cuts by the end of 2026, in line with the Fed’s recent outlook for gradual easing.
Expectations for lower rates have increased as the US job market slows and political pressure mounts. US President Donald Trump has again called for more rate cuts[8], and White House officials report dissatisfaction with the current pace of easing. Now, traders are watching November's US Nonfarm Payrolls’ data on[9] Tuesday, which could change views on when and how much rates might be cut.
In Canada, the loonie remains resilient. The Bank of Canada[10] has expressed confidence in its current policy, indicating that rates are appropriate to return inflation to target. Anticipation of stronger Canadian CPI data later today is also supporting[11] the currency.
With key inflation and employment data imminent on both sides of the border, USD/CAD remains vulnerable to further downside in the near term. The USD/CAD exchange rate stays pressured near 1.3750; recent lows as traders await Canadian inflation and US labour data for clearer policy direction.
Yen gains on expectations of a BoJ rate hike
The Japanese yen started the week strong, rising during Monday’s Asian session and moving USD/JPY down toward the 155.00 level, an area closely monitored by short-term traders. This movement reflects increased confidence that the BoJ will tighten policy soon, along with a weaker global risk tone that has boosted demand for safe-haven currencies.
Japan’s latest Tankan survey[12] reinforced support for the yen, showing improved business sentiment among large manufacturers. Companies reported less trade-policy uncertainty and strong demand in technology-linked sectors, supporting the view that domestic conditions are aligning with the BoJ’s requirements for policy normalisation. Governor Kazuo Ueda recently noted growing confidence in reaching the inflation target, which markets interpret as paving the way for a December rate hike[13].
This positive outlook for the yen is different from the situation in the United States, where the dollar remains under pressure after last week’s Fed rate cut[14]. Although the Fed has shown more caution about future rate cuts, markets still expect more cuts next year, which limits gains for the dollar. Ongoing political uncertainty, including questions about the Fed’s future leadership, also keeps markets cautious about the dollar[15].
Concerns about Japan’s fiscal outlook have not weakened the yen, indicating that monetary policy expectations remain the main driver. Focus now shifts to key US macroeconomic releases this week[16], including delayed payroll and inflation data, before markets turn to the BoJ’s policy decision and Governor Ueda’s press conference. Until then, USD/JPY will likely stay under pressure, with risks tilted in favour of the yen. The USD/JPY exchange rate trades to 155.00 defensively with markets focused on BoJ tightening expectations and upcoming US data.
Sterling steadies as markets await data and BoE signals
GBP/USD held steady during early Asian trading on Monday, staying close to 1.3360 level and above its 200-day moving average. Markets remain cautious, with prices stable as traders look ahead to important economic data and central bank decisions later this week. The US dollar attempted to build on last week’s modest rebound from two-month lows but found only limited support as investors stayed cautious and stocks weakened. Dollar gains remain limited. Although the Fed has adopted a more cautious approach after its recent rate cut[17][18], markets still anticipate possible further easing next year[19]as labor-market data weakens. Ongoing uncertainty about future Fed leadership[20] also makes investors less likely to back the dollar for now. Sterling, meanwhile, finds itself supported but capped. Market traders remain wary of placing fresh directional bets ahead of a heavy UK event calendar. UK labour-market data[21] due on Tuesday will give the first sign of domestic momentum, followed by inflation figures[22] on Wednesday and the Bank of England’s (BoE) policy decision[23] on Thursday. Markets are watching for signs that lower inflation could bring the BoE closer to a rate cut[24], which continues to hold back sterling’s gains. In the US, markets are also waiting for inflation data later this week, along with the delayed non-farm payrolls report. Until there is more clarity, GBP/USD is likely to keep trading in its usual range, helped by a weaker dollar outlook in the medium term but held back by short-term policy uncertainty in both the UK and US. The GBP/USD exchange rate holds steady near 1.3360 as traders position ahead of UK data and the Bank of England’s policy decision.
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