The AUD/USD pair has experienced a slight correction, hovering around the 0.6660 mark during the European session. A mild decline in the Australian asset can be attributed to the recovery attempt made by the US Dollar Index (DXY).
Following a steep decline, the USD Index has bounced back from 101.67. This minor recovery has been driven by investor concerns ahead of the release of the United States Consumer Price Index (CPI) data on Wednesday at 12:30 GMT.
Investors have assimilated the uncertainties surrounding corporate earnings, leading S&P500 futures to extend their overnight gains. Yields on 10-year US Treasury bonds have also rebounded to approximately 3.98%.
Over the past three trading sessions, the USD Index has consistently faced selling pressure as investors anticipate an earlier peak in interest rates by the Federal Reserve (Fed).
While economists at Commerzbank suggest it may be premature to disregard the Dollar entirely, the labor market report from Friday was not as negative as expected. It is likely that the labor market remains too tight for the Fed’s preference, which may prompt another key rate hike by the end of July.
However, it remains uncertain whether this will conclude the rate hike cycle and how soon rate cuts will follow.
Meanwhile, the Australian Dollar is poised with uncertainty ahead of a speech by Reserve Bank of Australia (RBA) Governor Philip Lowe. Investors are eager for interest rate guidance from Lowe, especially given the tightening labor market conditions.
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