AUD/JPY trades soft near 93.50 as global trade uncertainties increase safe-haven demand

• AUD/JPY faces headwinds as the Japanese Yen rises due to rising global trade uncertainties, boosting safe-haven demand.
• Markets are closely watching US-Japan bilateral trade talks, with Tokyo aiming to finalize a deal by June.
• Planned policy measures under the re-elected Australian PM Albanese could fuel inflation, potentially reducing the RBA's flexibility to lower interest rates.

AUD/JPY trades subdued near 93.40 during European hours on Monday after gaining for three consecutive sessions. The currency cross is under pressure as rising global trade uncertainties boost demand for safe-haven assets like the Japanese Yen (JPY). Thin market activity is expected due to a public holiday in Japan.

Over the weekend, US President Donald Trump confirmed ongoing trade talks with China, though no direct meetings with Chinese President Xi Jinping are scheduled. Meanwhile, China's Commerce Ministry announced it is reviewing a US proposal to restart negotiations.

Markets are also monitoring US-Japan bilateral trade discussions, as Tokyo pushes to conclude an agreement by June. Japan is urging Washington to reconsider additional tariffs on Japanese automobiles, aiming to dismantle Trump-era trade measures.

The AUD/JPY cross may regain its ground as the Australian Dollar (AUD) gains ground against its peers after Prime Minister Anthony Albanese secured a second three-year term in the 2025 Federal Election. With over 45% of votes counted, Albanese's Labor Party has claimed a parliamentary majority. His administration has pledged disciplined governance focused on cost-of-living relief, trade stability, and expanded investment in renewable energy, housing, tax cuts, and healthcare. However, these initiatives could stoke inflation, potentially limiting the Reserve Bank of Australia's (RBA) room to cut interest rates.

Economic data further supported the AUD. The TD-MI Inflation Gauge rose 0.6% MoM in April, easing from March's 0.7%, but marking a second consecutive monthly increase. Annual inflation also climbed to 3.3% from 2.8%, signaling persistent price pressures.