AUD/USD consolidates below mid-0.6600s; bulls await Fed decision amid RBA's hawkish tilt

AUD/USD lacks firm intraday direction as traders opt to wait for the crucial FOMC rate decision.
The RBA’s hawkish stance offsets mixed Chinese inflation data and acts as a tailwind for the AUD.
Bets for more rate cuts by the Fed keep the USD depressed and further lend support to the pair.

Haresh Menghani FXStreet

The AUD/USD pair is seen consolidating its recent strong gains to the highest level since September 18, touched the previous day, and seesaws between tepid gains/minor losses through the Asian session on Wednesday. Spot prices currently trade around the 0.6640 area, nearly unchanged for the day, as traders keenly await the outcome of a two-day FOMC meeting.

The US Federal Reserve (Fed) is scheduled to announce its policy decision later during the US session and is widely expected to lower borrowing costs by 25 basis points (bps). This has been a key factor behind the recent US Dollar (USD) decline to its lowest level since late October and the AUD/USD pair's strong move up witnessed over the past two weeks or so. Traders, however, seem reluctant to place aggressive bets and opt to wait for more cues about the Fed's future rate cut path.

Hence, the focus will remain glued to updated economic projections and Fed Chair Jerome Powell's comments during the post-meeting press conference. The outlook, in turn, will play a key role in influencing the near-term USD price dynamics and determining the next leg of a directional move for the AUD/USD pair. In the meantime, the Reserve Bank of Australia's (RBA) hawkish stance might continue to underpin the Australian Dollar (AUD) and act as a tailwind for the currency pair.

The RBA, as was expected, left the Official Cash Rate (OCR) unchanged at 3.6% on Tuesday. Moreover, RBA Governor Michele Bullock said that the Board discussed what they might have to do if rates need to go up and that it looks like more rate cuts are not needed. This, in turn, backs the case for a further appreciating move for the Aussie, which seems rather unaffected by mixed Chinese inflation figures, showing that consumer prices accelerated in November while producer deflation persisted.

The National Bureau of Statistics reported earlier today that the headline Consumer Price Index (CPI) accelerated to the 0.7% YoY rate last month, as compared to the 0.2% rise recorded in October. In contrast, the Producer Prices Index (PPI) declined 2.2% YoY in November, compared with a 2.1% fall in the previous month. Nevertheless, the fundamental backdrop seems tilted in favor of the AUD bulls and suggests that the path of least resistance for the AUD/USD pair remains to the upside.

Australian Dollar Price This Month

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this month. Australian Dollar was the strongest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.27%	-0.52%	0.30%	-0.88%	-1.35%	-0.73%	0.32%
EUR	0.27%		-0.25%	0.56%	-0.61%	-1.08%	-0.44%	0.60%
GBP	0.52%	0.25%		1.06%	-0.36%	-0.84%	-0.19%	0.85%
JPY	-0.30%	-0.56%	-1.06%		-1.17%	-1.65%	-1.01%	0.02%
CAD	0.88%	0.61%	0.36%	1.17%		-0.53%	0.17%	1.21%
AUD	1.35%	1.08%	0.84%	1.65%	0.53%		0.65%	1.70%
NZD	0.73%	0.44%	0.19%	1.01%	-0.17%	-0.65%		1.04%
CHF	-0.32%	-0.60%	-0.85%	-0.02%	-1.21%	-1.70%	-1.04%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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