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AUD/USD drops close to 0.6400 amid caution ahead of Powell’s speech.
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Fed Powell may deny rate cuts in the near term as robust retail demand and stable labor market.
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The Australian Dollar faced pressure as the Chinese economy shifted into deflation.
The AUD/USD pair remains on the backfoot near the crucial support of 0.6400 as investors await for Federal Reserve (Fed) Chair Jerome Powell’s remarks on interest rates and the outlook on the US economic performance in the fourth quarter of 2023.
The S&P500 opened on a cautiously positive note as investors worried about the Fed’s guidance at its last monetary policy meeting in 2023. Fed Powell is expected to lean towards keeping interest rates higher for a longer period to ensure that inflation must be brought down to 2%.
The US dollar index (DXY) is aiming to recover immediate resistance at 106.00 on hopes that Fed Powell will refuse to cut rates in the near term as strong retail demand and stable labor market conditions could keep fears of higher consumer inflation expectations at bay. The 10-year US Treasury yield held a recovery near 4.56% before Powell’s speech.
This week, investors focused on comments from Fed policymakers due to a light economic calendar. Next week, US inflation data for October will be in the spotlight. The impact of inflation data will be mild as one more inflation report will be released ahead of the December monetary policy meeting.
Meanwhile, the Australian Dollar faced pressure as the Chinese economy shifted into a deflation in October. The annual deflation rose by 0.2% against 0.1% as expected. Producers cut prices of goods and services at factory gates due to weak consumer spending. Being a proxy to China’s economic prospects, the Australian Dollar remains on the backfoot of deflation pressures.
AUD/USD
