China's latest macroeconomic data, released on January 17, 2025, has provided a significant boost to the Australian Dollar/Japanese Yen (AUD/JPY) exchange rate, pushing it above the mid-96.00s. This quarterly release revealed an actual Gross Domestic Product (GDP) growth of 5.4%, surpassing the consensus expectation of 5% and marking a notable increase from the previous quarter's 4.6%. The data underscores China's economic resilience, providing support to the Australian dollar while simultaneously reaffirming expectations set by Bank of Japan (BoJ) Governor Kazuo Ueda and Deputy Governor Ryozo Himino.
The report also highlighted that China's industrial production outperformed expectations, reaching 6.2% compared to a forecast of 5.4%. Furthermore, fixed asset investment advanced by 3.2% year-to-date (YTD) on a year-over-year basis as of December. These figures illustrate the robust nature of China's economic recovery, further solidifying its position as a key driver of global economic activity, with GDP considered the main measure of China's economic health.
The positive Chinese data has helped the AUD/JPY cross recover slightly from a nearly one-month low. The Australian dollar often benefits from strong Chinese economic performance due to Australia's substantial trade links with China. However, despite this uptick, the Reserve Bank of Australia's (RBA) recent dovish policy shift warrants some caution among investors. The RBA's approach, coupled with speculative concerns over potential tariff plans by former U.S. President Donald Trump, might limit further gains for the AUD/JPY pair.
China's economy expanded by 5.4% over the year in the fourth quarter of 2024, showcasing a consistent upward trajectory in economic growth. The stronger-than-expected GDP figures underline the effectiveness of China's strategic policies in fostering economic stability and growth, despite global uncertainties. The data not only underpins the Australian dollar but also lends support to spot prices, further enhancing the AUD/JPY exchange rate's performance.
While the AUD/JPY has experienced a recovery, market participants remain wary of external factors that could impact future movements. The RBA's dovish stance, emphasizing caution in monetary policy adjustments, suggests that any significant upward momentum in the AUD/JPY may be tempered in the near term. Additionally, geopolitical concerns such as potential tariff implementations could introduce volatility into the market dynamics.