AUD/USD stabilizes near 0.6600 awaiting US CPI and Fed

• AUD/USD remains slightly below 0.6600 as the outlook remains uncertain.
• The Fed is expected to keep interest rates unchanged for the seventh consecutive time.
• The Australian dollar will dance to the tune of employment data.

The AUD/USD pair modestly gains ground below the 0.6600 round resistance level in the American session on Tuesday. AUD/USD finds support even as US Dollar (USD) holds firm amid cautious market mood ahead of US Consumer Price Index (CPI) data. ) for May and the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

The S&P 500 opens on a bearish note amid expectations that the Fed will keep interest rates in the 5.25%-5.50% range. US 10-year Treasury yields have fallen to 4.44% but maintain their strong recovery from 4.27%. The US Dollar Index (DXY) extends its rise to the monthly high near 105.45.

Investors believe the Fed will keep interest rates at their current levels for the seventh consecutive time as the fight against persistent inflation continues. Fed officials will not consider rate cuts until they are convinced that inflation will sustainably return to the desired rate of 2%.

Investors will pay close attention to the US CPI data for May to determine the current state of inflation. Annual core inflation, which excludes food and energy prices, is estimated to have slowed to 3.5% from the previous release of 3.6%, with the headline figure rising steadily by 3.4%.

Meanwhile, the Australian dollar will dance to the tune of employment data for May, due out on Thursday. The Australian workforce is expected to have increased by 27,500 new payrolls. In April, Australian employers hired 38,500 new workers. The unemployment rate is estimated to have decreased to 4.0% from 4.1% in April. Employment data will influence market speculation on Reserve Bank of Australia (RBA) rate cuts.

Investors are currently hoping the RBA will not cut interest rates this year. Market expectations that the RBA will keep interest rates tight throughout the year strengthened after RBA Governor Michele Bullock indicated the central bank is prepared to raise interest rates further if inflation does not returns to the target range of 1%-3%.