Ella 
In early Asian trading on Monday, AUD/USD remained above the mid-range of 0.6500. AUD/USD maintains its upward momentum, with the US dollar index hovering near the 104.00 mark. Markets are likely to be calmer on Monday, with investors awaiting Australia’s monthly inflation rate on Wednesday to inject new impetus into the market. AUD/USD is currently trading around 0.6565, up 0.04% on the day.
Several Federal Reserve officials last week emphasized concerns over the risks of cutting rates too early or too much, rather than keeping rates high for too long and damaging the economy. The Fed wants to see further signals that inflation is approaching its 2% target before cutting interest rates. That said, the argument that the U.S. will maintain higher interest rates in the long term could limit the downside for the U.S. dollar and be negative for AUD/USD.
Markets expect the Fed to cut interest rates at its May or June meeting, and Fed Chairman Christopher Waller has hinted that a rate cut could begin later this year. Investors will get more information from the core personal consumption expenditures price index (Core PCE), the inflation gauge watched by the Fed, which is expected to increase at a monthly rate of 0.4% in January and an annual rate of 2.8%.
In the Australian dollar, the Reserve Bank of Australia kept the cash rate steady at 4.35% earlier this month. In the minutes of the meeting, the Reserve Bank of Australia said that inflation will return to the target level within a reasonable time frame, although this process will take some time. However, the possibility of further interest rate hikes by the Reserve Bank of Australia cannot be ruled out.
Australia’s January consumer price index (CPI) will be released on Wednesday, followed by retail sales on Thursday. In the United States, annualized GDP (fourth quarter) and core consumer price index will be released on Wednesday and Thursday respectively.
