Ella 
AUD/USD bears look for downside consolidation around key US events.
US inflation and Fed decisions will be the main risks for AUD/USD trading.
AUD/USD was flat on Tuesday ahead of key events in the US this week, starting with today’s Consumer Price Index. The US inflation rate in May will be a key focus, while the Federal Reserve’s interest rate decision will be announced later on Wednesday, and the market will remain cautious on Monday.
The Fed is expected to keep interest rates unchanged for the first time since January 2022. Analysts at TD Securities explained that interest rate policy has come to a critical moment, but we maintain our long-standing view that the Fed will finally raise interest rates by 25 basis points in June, reaching a range of 5.25%-5.50%.
Analysts at TD Securities said that if the Fed decides not to raise interest rates in June, we expect the Fed to hold its hands and release hawkish rhetoric (ie statement, dot plot and press conference), indicating a possible rate hike in July.
As for today’s consumer price index, analysts said core prices likely remained firm in May, with the index rising a strong 0.4% for the second straight month, also in line with the median value from June 2022.
Goods inflation is likely to remain positive, with housing prices remaining a key wildcard (moderation expected). Lower gasoline prices (-6% MoM) will weigh on non-core inflation. Our monthly forecasts imply headline/core inflation of 4.0%/5.3% yoy respectively.
Reserve Bank of Australia remains hawkish on interest rate policy
At the same time, in terms of the RBA policy, Standard Chartered Bank pointed out that the central bank has now turned hawkish again, and the RBA was significantly dovish in the most recent March and April, which led the bank to reduce the prospect of the RBA raising interest rates.
The RBA then returned to a hawkish stance in May and June. The June meeting statement noted that upside risks to inflation had increased and removed language that medium-term inflation expectations were well anchored.
Analysts concluded that although the door is open for more rate hikes, it is still difficult to assess whether the RBA will continue to raise interest rates in a row. The Reserve Bank of Australia raised interest rates by 25 basis points each in May and June since pausing rate hikes in April. Given that the RBA meets every month (except January) and that it is still trying to achieve a soft landing, we think the RBA may forego a rate hike in July to assess key quarterly inflation data (July 26 day). After that, we see the RBA raising rates by 25bps each in August and September, bringing the policy rate to 4.6% (our previous forecast was 3.85%).
