AUD/USD nears 0.6400 ahead of Fed Powell remarks

• AUD/USD falls near 0.6400 amid caution ahead of Powell’s speech.
• Fed Chair Powell is likely to deny near-term rate cuts in the face of robust retail demand and labor market stability.
• The Australian dollar came under pressure from the deflation of the Chinese economy.

The pair AUD/USD remains bearish near the crucial support of 0.6400 as investors await statements from Federal Reserve (Fed) Chair Jerome Powell on interest rates and the outlook for US economic developments in the fourth quarter quarter of 2023.

The S&P 500 opens on a cautiously positive note as investors worry about the Fed’s guidance at the final policy meeting in 2023. Fed’s Powell is expected to lean toward keeping interest rates higher for a longer period to ensure that inflation must fall to 2%.

The US Dollar Index (DXY) aims to recapture the immediate resistance of 106.00 on hopes that the Fed’s Powell will deny near-term rate cuts as strong retail demand and stable labor market conditions could maintain fears of an increase in consumer inflation expectations remain intact. US 10-year Treasury yields maintain recovery near 4.56% ahead of Powell’s speech.

This week, investors have focused on comments from Fed policymakers due to the light economic calendar. Next week, US inflation data for October will remain in focus. The impact of the inflation data would be mild as inflation will be reported once again before the December policy meeting.

Meanwhile, the Australian dollar came under pressure from the Chinese economy’s shift toward deflation in October. Annual deflation increased by 0.2% compared to the 0.1% expected. Producers cut prices on goods and services at the factory gates due to weak consumer spending. As a proxy for China’s economic prospects, the Australian dollar lags behind deflationary pressures.