Anna 
The AUD/USD pair continues to face selling pressure, extending Friday’s retracement slide from the 0.6665-0.6670 region, marking its highest level since mid-January. During the first half of the European session on the first day of the week, the pair remains just above the key 0.6600 round-figure mark, with a notable corrective slide proving elusive.
Mixed Chinese inflation figures over the weekend did little to alleviate concerns about deflation, contributing to the pressure on the China-proxy Australian Dollar (AUD). China’s Consumer Price Index (CPI) recorded its first increase in four months, while the Producer Price Index declined by the 2.7% year-on-year rate for the reported month. In addition to economic concerns, news of potential US sanctions on several Chinese tech companies and a general weakening of equity markets further undermine the risk-sensitive Aussie.
Concurrently, the US Dollar (USD) struggles to gain traction, following Friday’s rebound from mid-February lows, amid expectations of an imminent shift in the Federal Reserve’s (Fed) policy. The prevailing belief among market participants is that the Fed will commence interest rate cuts in June, a sentiment reinforced by a rise in the US jobless rate. This, in turn, keeps the yield on the 10-year US government bond near a one-month low, creating a defensive stance for the USD and offering support to the AUD/USD pair.
Given the uncertainty surrounding the Fed’s future actions, traders are likely to exercise caution and refrain from aggressive directional bets. Many will opt to wait on the sidelines until the release of the latest US consumer inflation figures on Tuesday, a crucial event that could significantly influence expectations about the Fed’s rate-cut trajectory and subsequently impact the AUD/USD pair. In the absence of major economic releases from the US on Monday, the pair’s movements will be dictated by USD dynamics and broader risk sentiment.
