AUD/JPY hovers around 98.00 as traders await Meeting Minutes from both central banks

• AUD/JPY maintains its position ahead of Meeting Minutes from the RBA and BoJ due on Tuesday.
• The Australian Dollar could receive downward pressure as the RBA may begin rate cuts in February.
• Stronger Japan's inflation data has increased the likelihood of a potential rate hike by the BoJ in January or March.

AUD/JPY retraces its recent losses from the previous session, trading around 98.00 during the early European hours on Monday. However, the upside of the AUD/JPY cross could be restrained as the Australian Dollar (AUD) could face challenges amid the increased likelihood of the Reserve Bank of Australia (RBA) beginning cutting its cash rate as early as February, due to mounting signs of an economic slowdown.

Moreover, the National Australia Bank (NAB) maintained its forecast for the first RBA rate cut at the May 2025 meeting, though they acknowledged February as a possibility. NAB's report indicates that the Q4 trimmed mean inflation is projected at 0.6% quarter-on-quarter, with a gradual easing expected, reaching 2.7% by late 2025.

Strong National Consumer Price Index (CPI) data from Japan released on Friday left the door open for a potential interest rate hike by the Bank of Japan (BoJ) in January or March. Inflation reached a three-month high of 2.9% year-over-year in November, up from 2.3% in October. Additionally, the annual core inflation rate rose to 2.7%, exceeding market expectations of 2.6%.

However, traders remain skeptical about the BoJ's intentions to hike rates further following the central bank's decision to keep its policy rate for the third consecutive meeting, keeping the short-term rate target within the range of 0.15%-0.25%, in line with market expectations.

Traders are eagerly anticipating the release of the Meeting Minutes from both the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ), scheduled for Tuesday.