AUD/USD posts modest gains near two-week highs around 0.6630, US CPI data looms

The AUD/USD pair posts modest gains near two-week highs of around 0.6630 on Wednesday during the early Asian training hours. The US Dollar (USD) struggles to find a clear direction near the 104.00 mark ahead of the release of the US March Consumer Price Index (CPI) inflation figures and the FOMC Minutes on Wednesday.  

The Chicago Fed President Austan Goolsbee, a prominent dove on the Fed’s board, said on Monday that the recent jobs report was “quite strong”, but the Fed must consider how much longer it can maintain its current interest rate stance without it damaging the economy. Goolsbee added that the Unemployment Rate could go higher if interest rates remain high for too long. Minneapolis Fed President Neel Kashkari penciled in two rate cuts for the year but questioned the need to cut the interest rate if inflation remains sideways.

Chair Jerome Powell and many Fed officials emphasized that the main factor in the central bank's rate-cutting decision is when or whether inflation will return to the Fed’s 2% target. Investors will closely monitor the US CPI inflation data, which might offer some hints about the inflation trajectory and the path of monetary policy. The CPI figure is estimated to show an increase of 3.4% year over year in March. The firmer-than-expected reading could dampen expectations for Fed rate cuts in June, while softer data could fuel speculation for rate reductions.

On the Aussie front, after leaving rates on hold at 4.35% at its March meeting, the Reserve Bank of Australia (RBA) and its governor Michele Bullock didn’t indicate the timing of the easing cycle, but investors have already priced in when they believe rate cuts could happen. Commonwealth Bank expected three 25 basis points (bps) interest rate cuts by the end of the year starting from September, while Westpac believes interest rate cuts will begin in September and NAB and ANZ believe it won’t be until November.