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AUD/USD consolidates near 0.6750 ahead of Fed’s Powell testimony

  • AUD/USD trades sideways near 0.6750 as Fed’s Powell testimony comes into focus.
  • Rising market speculation about Fed rate cuts in September has improved market sentiment.
  • The RBA is expected to raise interest rates further.

The AUD/USD pair is trading sideways in the European session on Tuesday after marking a fresh six-month high at 0.6760 on Monday. The Australian asset is consolidating as investors remain on the sidelines ahead of Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony before Congress, scheduled for 14:00 GMT.

Investors expect the Fed’s Powell to argue for keeping interest rates at their current levels until policymakers get evidence that inflation will return to the desired 2% rate. In his discussions at the European Central Bank’s (ECB) Forum on Central Banking last week, Powell said the central bank has made some progress on inflation and recent data suggests disinflation has resumed.

For further clarity on the state of inflation, investors will focus on the US (US) Consumer Price Index (CPI) data for June, due on Thursday. Economists have forecast that core inflation, which excludes the volatile food and energy items, grew steadily by 0.2% and 3.4% on a monthly and annual basis, respectively.

Meanwhile, market sentiment remains upbeat amid strong speculation that the Fed will start cutting interest rates as early as the September meeting. S&P 500 futures have posted decent gains in European trading hours. The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, is gaining ground near 105.00.

On the Australian front, investors are hoping that the Reserve Bank of Australia (RBA) may tighten policy further as the disinflation process appears to have reversed. Australia’s monthly CPI rose sharply by 4% in May, delaying expectations of rate cuts this year.

Looking ahead, investors will focus on China’s CPI data for June, due out on Wednesday. It should be noted that Australia is China’s largest trading partner and a significant shift in inflationary pressures in the Chinese economy could influence the outlook for the Australian Dollar (AUD).

Economic indicator

Testimony of Fed Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell testifies before Congress and provides an overview of the economy and monetary policy. Powell’s prepared remarks are released ahead of the Capitol Hill appearance. The event was postponed due to the funeral of former President George H.W. Bush.



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Source: Fx Street

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