AUD/USD Trades With Modest Losses Around Mid-0.6700s, Focus Remains Glued To US CPI

The AUD/USD pair attracts some sellers following an intraday uptick to the 0.6775 area on Wednesday and turns lower for the second successive day, though it lacks follow-through. Spot prices trade with a mild negative bias, just above mid-0.6700s during the early part of the European session, down less than 0.10% for the day.

A generally softer tone around the equity markets lends some support to the safe-haven US Dollar (USD), which, along with concerns over Chinese economic growth, turn out to be a key factor undermining the risk-sensitive Aussie. However, the downside for the AUD/USD pair remains cushioned, at least for the time being, warranting some caution for aggressive bearish traders and positioning for any meaningful slide.

The Australian Dollar (AUD) continues to draw support from the Reserve Bank of Australia’s (RBA) hawkish outlook, indicating that some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time. On the other hand, the Federal Reserve (Fed) is expected to pause its year-long rate-hiking cycle, which acts as a headwind for the USD and lends support to the AUD/USD pair.

The markets, meanwhile, have also started pricing in the possibility that the US central bank will start cutting interest rates later this year. This, in turn, suggests that the path of least resistance for the buck is to the downside and supports prospects for the emergence of some dip-buying around the AUD/USD pair. Traders, however, might prefer to wait for the release of the latest US consumer inflation figures before placing fresh bets.

The crucial US CPI report will play a key role in influencing expectations about the Fed’s next policy move and drive the USD demand in the near term. Apart from this, the broader risk sentiment should provide some meaningful impetus to the AUD/USD pair and allow traders to grab short-term opportunities ahead of Chinese inflation figures, due during the Asian session on Thursday.

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