Despite these economic signals, concerns over potential US tariffs on Chinese goods add to market uncertainty. White House Press Secretary Karoline Leavitt confirmed that President Donald Trump is still considering a 10% tariff on China, with a final decision expected in February. Since China is Australia's largest trading partner, higher US tariffs on Chinese goods could weaken Chinese demand for Australian exports, further pressuring the Australian dollar.

The mixed economic signals, including steady PMI figures and stable unemployment, suggest that the RBA may wait for additional data before committing to a rate cut. If the central bank keeps rates steady, the AUD/USD could stabilize or even rebound, depending on market sentiment. However, if the RBA adopts a dovish policy stance, the Australian dollar may face further downside pressure, potentially testing new lows below 0.6200.

The Japanese Yen (JPY) continues to strengthen against the US Dollar (USD) as expectations of further Bank of Japan (BoJ) rate hikes drive bullish sentiment. The minutes from the BoJ's December meeting reveal discussions on using neutral interest rate estimates to guide future rate increases.

Additionally, former BoJ board member Makoto Sakurai highlighted solid economic growth, rising wages, and sustained price increases as key factors supporting gradual monetary tightening. The chart below shows this wage growth. The average monthly wage growth is 342k JPY/month, while cash earnings growth is 3%.