AUD/USD holds ground near 0.6400 ahead of the Australian employment data

• AUD/USD edges higher to 0.6420 after bouncing off the low of 0.6380.
• US inflation data pushes the market to re-pricing the odds of further rate hikes from the Fed in the November meeting.
• Australian economy is expected to see a positive change of 23K in August.
• Market players will closely watch the Australian employment report.

The AUD/USD pair holds above 0.6400 during the early Asian session on Thursday. Meanwhile, the US Dollar Index (DXY) hovers around 104.75 after retreating from 104.96 in response to the upbeat US inflation data. The pair is trading near 0.6420, losing 0.02% on the day. The market turns cautious ahead of the Australian Employment Report due later in the Asian session in the day.

Data released from the US Bureau of Labor Statistics on Wednesday revealed that the US Consumer Price Index (CPI) for August rose 0.6% MoM from 0.2% in the previous reading while the annual figure came in at 3.7% from 3.2%, beating market expectation. The annual core CPI came in at 4.3% versus 4.7% prior. In response to the data, the US Dollar (USD) surged and later lost traction.

The US inflation pushes the market to re-evaluate the odds of further rate hikes from the Federal Reserve (Fed), despite the Fed on pace to hold rates steady at its upcoming rate meeting next week. According to the CME Fedwatch Tool, traders have priced in 97% odds of interest rate unchanged in September at 5.25%-5.50%. However, the possibility of a rate hike in the November meeting increased to 49.2%. In line with that, hawkish bets may limit the downside of the USD and act as a headwind for the AUD/USD pair.

On the other hand, the Aussie’s upside was capped due to the consumer confidence data fell into negative territory in August. On Tuesday, Australia’s Westpac Consumer Confidence for September fell 1.5% to 79.7, following a 0.4% drop in the previous reading. The figures fueled concern about the impact of the economic slowdown in China.

Later in the day, the Australian Bureau of Statistics will release the Employment Report. The Australian economy is expected to see a positive change of 23K in August following the previous month's decline of 14.6 K. On the US docket, the US Retail Sales and core Producer Price Index will be released. These figures could give a clear direction to the AUD/USD pair.