AUD/JPY trades below 92.00, edges lower due to RBA rate cut expectations

• AUD/JPY depreciates as the AUD comes under pressure, driven by growing RBA's rate cut expectations in May.
• The Australian Dollar may find support from signs of easing tensions between the US and China.
• The Japanese Yen weakens amid decreasing safe-haven demand due to improving global trade sentiment.

AUD/JPY pauses its three-day winning streak, trading near 91.80 during early European hours on Monday. The currency cross weakens as the Australian Dollar (AUD) comes under pressure, driven by growing expectations that the Reserve Bank of Australia (RBA) will cut interest rates by 25 basis points in May. Rising economic uncertainties and intensifying concerns over the global trade outlook are adding to the downward momentum.

On Thursday, Westpac forecasted that the RBA would lower rates by 25 basis points at its May 20 meeting. The RBA's data-dependent policy approach has made it challenging to predict its decisions beyond the next meeting with confidence.

The AUD/JPY cross could strengthen as the Australian Dollar could find support from signs of easing tensions between the US and China, one of Australia's key trading partners. On Friday, China exempted certain US imports from its 125% tariffs, boosting hopes that the long-running trade war between the world's two largest economies may be approaching a resolution.

However, this optimism was tempered when a Chinese embassy spokesperson told Reuters that "China and the US are not having any consultation or negotiation on tariffs," urging Washington to "stop creating confusion."

Meanwhile, the downside for the AUD/JPY cross may be limited as the Japanese Yen (JPY) softens amid improving global trade sentiment. Last week, Japanese Finance Minister Katsunobu Kato and US Treasury Secretary Scott Bessent met privately during the IMF and World Bank spring meetings in Washington. While Kato offered few details, he emphasized that Japan and the US would maintain close and constructive dialogue on exchange rates, suggesting currency issues may feature in broader trade discussions.