Australian Dollar Climbs Above 0.6650 on Fed Rate Cut Expectations, Aussie Inflation in Focus

Market Sentiment and Fed Projections

The S&P 500 futures rallied in European trading hours, reflecting an improved risk appetite among investors. Meanwhile, the US Dollar Index (DXY) struggled to maintain its recent highs, as market participants increasingly price in two Fed rate cuts this year, exceeding the central bank's own projections.

Inflation Data in the Spotlight

Investors are keenly awaiting the release of US core Personal Consumption Expenditure (PCE) price index data for May on Friday, the Fed's preferred inflation gauge. This data will provide crucial insights into the Fed's future monetary policy decisions. Additionally, the Australian Dollar is also in focus ahead of the release of its own monthly Consumer Price Index (CPI) data on Wednesday. A higher-than-expected reading could bolster the case for the Reserve Bank of Australia (RBA) to keep interest rates unchanged for a longer period.

Technical Analysis: AUD/USD Upward Momentum Builds

The AUD/USD pair is gaining momentum, supported by the positive market sentiment and expectations of Fed rate cuts. The break above 0.6650 indicates strong buying interest, and the pair could potentially target higher levels in the near term.

Key Takeaways:

• The Australian Dollar strengthens on increased expectations of Fed rate cuts.
• Market sentiment is positive, with risk assets rallying and the US Dollar weakening.
• The upcoming US and Australian inflation data will be crucial for determining the direction of both currencies.
• The technical outlook for the AUD/USD pair is bullish, with potential for further upside.