AUD/USD retreats towards 0.6400 as USD strengthens, with Powell’s speech in focus

• The AUD/USD pair falls to near 0.6400 as the attractiveness for the US Dollar improves.
• US Dollar strengthens ahead of Powell’s speech.
• The RBA’s Bullock kept hopes alive for further rate tightening, citing that progress in bringing inflation down to 2% has slowed.

The pair AUD/USD retreats towards the support of the round level of 0.6400 in the early stages of the New York session. The pair is expected to continue its bearish trend as the attractiveness of safe-haven assets has improved. The US dollar continues to rally as Federal Reserve (Fed) policymakers see further interest rate hikes as necessary to comfortably tame inflationary pressures.

Fed policymakers Michelle Bowman and Neel Kashkari remained eager when talking about interest rates on Tuesday, citing the risks of persistent inflation due to the resilience of the U.S. economy. The Fed’s Bowman believes further rate hikes are necessary as the current tightening of financial conditions has deliberately contributed to rising bond yields, which could no longer remain elevated.

The S&P 500 opened cautiously as investors worried ahead of Fed Chair Jerome Powell’s interest rate guidance. Investors are confused about whether Jerome Powell would discuss the need for further policy tightening to cement price stability or would rarely emphasize maintaining current restrictive policy for a longer period.

The Dollar Index (DXY) gains strength to regain the immediate resistance of 106.00 even though investors see that the Fed has ended interest rate hikes. The tense U.S. labor market has begun to relax, while business investment remained weak in the latest quarter due to rising borrowing costs.

Meanwhile, the risks of escalating tensions in the Middle East have eased as market participants see conflicts between Israel and Palestine continuing.

The Australian dollar failed to strengthen despite the interest rate hike announced on Tuesday by the Reserve Bank of Australia (RBA). The RBA raised its official cash rate (OCR) by 25 basis points (bps) to 4.35%. RBA Governor Michele Bullock kept hopes alive for a further rate tightening, saying progress in bringing inflation down to 2% has slowed and the risks of persistent inflation among consumers have increased. .