AUDJPY November 2025 fundamental analysisAustralian Dollar (AUD): Inflation Surprise Supports Hold
Reserve Bank of Australia Stance
The Australian Dollar received a powerful boost from the September quarter inflation data released on October 29, which delivered a significant upside surprise. Headline CPI accelerated to 1.3% quarter-on-quarter and 3.2% year-on-year, well above the RBA's 2-3% target midpoint. More importantly, the RBA's preferred trimmed mean measure climbed 1.0% quarterly (beating 0.8% expectations and the RBA's August forecast of 0.6%), pushing the annual rate to 3.0%—the first uptick since December 2022.
RBA Governor Michele Bullock had explicitly stated earlier in the week that a 0.9% quarterly rise in trimmed mean inflation would be viewed as a "material miss". At 1.0%, the threshold was decisively crossed. Bullock also described the labor market as "a little tight" despite unemployment rising to 4.5%, and emphasized the RBA's unwillingness to "leap at a single number".
Rate Cut Expectations Pushed Back
The inflation surprise has dramatically reshaped rate cut expectations. The November 4 meeting confirmed the decision to hold rates steady for the moment, and the first 25 basis point cut has been delayed from February 2026 to May 2026. This represents a stark shift from earlier expectations for near-term easing. The RBA cash rate remains at 3.60%, providing a substantial yield advantage over other major central banks.
November Outlook: Very Bullish
The Australian Dollar is the clear standout for November strength. AUD/USD surged to a three-week high of 0.6607 following the inflation data, and technical analysis suggests further upside potential toward 0.6706. The currency benefits from multiple tailwinds: delayed rate cuts relative to other central banks, particularly the Fed; buoyant risk sentiment following the preliminary US-China trade framework; and strong commodity prices, including copper near three-month highs. Against the weaker commodity currencies like CAD and NZD, the Australian Dollar is exceptionally well-positioned.
Japanese Yen (JPY): Political Dovishness Delays Normalization
Bank of Japan: Divided Board, Delayed Tightening
The Bank of Japan kept its benchmark short-term rate unchanged at 0.5% at its October meeting, as widely expected, but the decision revealed significant internal division. The vote split 7-2, with board members Naoki Tamura and Hajime Takata advocating for a hike to 0.75%, repeating their stance from the September meeting. Takata argued that "now is the appropriate time to raise interest rates," noting that inflation has remained above the bank's target for three and a half years, while Tamura called for moving toward neutral rates.
Despite these hawkish voices, Governor Kazuo Ueda maintained a cautious approach, emphasizing that the BoJ would continue with policy normalization "once its economic projections are met" but warning that global trade policies could slow growth and hurt corporate profits. The central bank reiterated its inflation outlook, projecting core CPI at 2.7% in 2025, 1.8% in 2026, and 2.0% in 2027, while raising 2025 growth forecasts slightly to 0.7%.
Political Constraints: The Takaichi Factor
The election of Sanae Takaichi as Prime Minister in mid-October significantly altered the trajectory of BoJ policy expectations. Takaichi, known as a fiscal dove who favors expansionary fiscal measures and loose monetary policy, has complicated the path toward further tightening. Following her election, the yen depreciated more than 2% against the USD, and market expectations for an October rate hike evaporated.
The new government's support for accommodative policy creates a political constraint on the BoJ's normalization efforts, even as some policymakers argue for immediate rate hikes. US Treasury Secretary Scott Bessent has urged the BoJ to accelerate rate hikes to prevent excessive yen depreciation, adding external pressure to the central bank's considerations. Markets now assign only a 47% chance of a December rate hike, with consensus building around a delayed move to early 2026.
November Outlook: Persistent Weakness Despite Normalization Promise
The Japanese Yen carries a weak fundamental outlook for November, reflected in its trading near 154 per USD—nine-month lows and close to the 37-week low of 153.28. The currency has weakened more than 4% in October alone, making it one of the worst G10 performers. Despite some hawkish board members and the BoJ's stated intention to continue normalization, the dovish political environment and cautious central bank approach leave the yen vulnerable.
The 3.25% interest rate differential with the USD remains a key driver supporting USD/JPY carry trades, though this spread is expected to compress toward 2.5% as the Fed continues cutting while the BoJ only gradually raises rates. While this compression could eventually support the yen, the timeline remains uncertain—potentially extending into 2026 rather than materializing in November. Technical analysis suggests immediate support near 151.73 (21-day average) with the next level around 150.11 (50-day average), but resistance looms at 154.80 and potentially 155 if the BoJ remains dovish. For November, the yen is expected to remain under pressure against most major currencies, while showing marginal strength only versus the aggressively easing NZD.
Verdict
Given the currently unmatched strength of the AUD and the JPY's continued weakness due to dovish monetary policy despite persistent inflation, AUD/JPY is a clear BUY for November.
