**Australian Dollar (AUD/USD) Outlook: Volatility Expected Ahead of US Federal Reserve and Australian CPI Announcements**
*Credit to Thomas Westwater, original author at FOREX.com*
### Introduction
The Australian Dollar (AUD) has been catching the eye of traders as the currency approaches significant economic events that could prompt heightened volatility in the AUD/USD currency pair. The spotlight this week falls on both the US Federal Reserve’s monetary policy decision and the upcoming Consumer Price Index (CPI) release from Australia. The combination of these events may set the tone for AUD/USD’s direction in the near term, as traders weigh contrasting signals from two major economies.
This article examines recent movements in the AUD/USD, central bank policy expectations, market sentiment, and key technical levels, integrating data from both the US and Australia. Further, it provides a comprehensive outlook for the Australian Dollar and factors traders should consider as these pivotal events unfold.
### AUD/USD Recent Performance
The AUD/USD, often referred to as the “Aussie,” has shown remarkable resilience in recent sessions. On the back of improved sentiment across global risk assets, the Aussie rebounded from June lows and tested psychological resistance levels. A mix of domestic optimism and global influences has been driving the recent price action.
**Key factors behind the AUD/USD’s movement include:**
– Growing positive sentiment towards China’s economy, which is closely linked to Australia due to strong trade ties.
– The softening US Dollar as markets anticipate the Federal Reserve’s next moves.
– Firm equity market performance encouraging risk-taking, indirectly supporting higher-yielding currencies like the AUD.
However, beneath the surface are significant macroeconomic uncertainties that make the near-term outlook precarious. The Australian Dollar remains deeply sensitive to any shifts in global risk preferences, making volatility ahead of the Federal Reserve and the Australian CPI all but certain.
### The Federal Reserve’s Rate Decision: Market Expectations
The main event in the global financial calendar this week is the Federal Reserve’s policy decision, set for release at their June Federal Open Market Committee (FOMC) meeting. At the time of writing, expectations are firmly in favor of the Fed keeping interest rates unchanged within the current target range of 5.25%-5.50%.
Nonetheless, the real focus is not on the rate decision itself, but on the accompanying press conference and the release of the quarterly Summary of Economic Projections (SEP), commonly known as the “dot plot.” This tool provides insight into where individual Fed policymakers see interest rates heading over the coming months and years.
**Issues to watch from the Federal Reserve:**
– The “dot plot”: Any reduction in the number of projected rate cuts for 2024 compared to the last update.
– Jerome Powell’s comments: The tone adopted by the Fed Chair during the press conference will be scrutinized for clues about future policy shifts.
– Inflation commentary: Observations regarding persistent inflation pressures in the US and implications for rate trajectory.
Markets have been
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