AUD/USD struggles to cross the 0.6350 hurdle, Aussie Inflation/US GDP in focus

The AUD/USD pair surrendered its pullback move to near 0.6350 in the Tokyo session. China’s Jinping-infused pessimism is weighing pressure on the aussie dollar. The risk-on impulse is still solid despite a minor fall in S&P500 futures after back-to-back bullish settlements. Meanwhile, the US dollar index (DXY) is attempting to recapture the critical hurdle of 112.00 after a subdued opening in Tokyo.

The 10-year US Treasury yields have trimmed to 4.21% amid a positive market sentiment. The chances for a fourth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed) stand at 95%, according to the CME FedWatch tool.

A Reuters poll on Fed’s interest rate projections claimed that the central bank will announce a fourth consecutive 75 bps rate hike. Other outcomes of the Reuters poll state that the central bank should not pause until inflation falls to around half its current level. No, doubt the aggressive rate hike cycle by the Fed is also welcoming the risk of recession ahead.

Fears of recession risk have escalated significantly as US Treasury Chief Janet Yellen cited “Cannot rule out risk” of a recession, as reported by MSNBC news.

Going forward, Thursday’s US Gross Domestic Product (GDP) data will hog the limelight. The annualized GDP is expected to improve significantly to 2.4% vs. a decline of 0.6% reported earlier.

On the Australian front, the unprecedented third term for China’s leader XI Jinping has shaken the aussie bulls. Growth prospects in China are at stake which is impacting the trade projections of Australia. Apart from that, Australian Consumer Price Index (CPI) data is gaining more traction. According to the estimates, the headline inflation will accelerate to 7.0% vs. the prior release of 6.1% on an annual basis.