AUD/USD Reflects Anxiety Ahead Of Australia's Budget, With US Inflation Near The Middle of 0.6700

AUD/USD is inactive near 0.6750, having recently retreated from the intraday high, as bulls and bears remain vigilant ahead of Monday's key data/events during the early Asian session.

In doing so, the risk-barometer pair reflects the market's mixed emotions in the face of concerns emanating from US banks and debt ceiling discussions, as well as optimism regarding Australia and the Reserve Bank of Australia's (RBA) hawkish bias.

Lately, market sentiment has deteriorated as pressure mounts on US policymakers to resolve the debt ceiling conundrum in light of the imminent depletion of funds in June. The impending downgrade of the United States' credit rating by a European rating agency could contribute to the risk-averse disposition. Nevertheless, the combination of the RBA's hawkish surprise and the Fed's dovish rate hike maintains AUD/USD buyers optimistic.

Reuters reported on Monday that Australia's center-left Labor government would include A$14.6 billion ($9.84 billion) over four years in the federal budget for cost-of-living relief for families and businesses, with the promise that it would not fuel inflation.

In a similar vein, the RBA's quarterly Statement on Monetary Policy (SoMP), also known as the Monetary Policy Statement (MPS), signaled readiness for additional rate rises and defended hawks after a 0.25 percentage point rate increase earlier in the week surprised markets.

According to Reuters, US Treasury Secretary Janet Yellen issued a stark warning on Sunday that a failure by Congress to act on the debt ceiling could provoke a "constitutional crisis" that would also call into question the federal government's creditworthiness.

In addition, the US employment report for April astonished markets by revealing an increase in headline Nonfarm Payrolls (NFP) of 253K, whereas prior readings were revised down by 165K. In addition, the Unemployment Rate decreased to 3.4% from 3.5% market forecasts and the previous mark, while Average Hourly Earnings increased to 4.4% from 4.3% previously (revised) and analysts' predictions of 4.2%.

Following the positive US employment report, James Bullard, president of the Federal Reserve Bank of St. Louis, who supported the 25 basis point rate hike taken by the Fed last week, described it as "a good next step." To support his hawkish inclination, the policymaker cited the substantial amount of inflation in the economy and the "very tight" labor market.

In addition, Scope Ratings, a leading European rating agency, has placed the United States' AA long-term issuer and senior unsecured debt ratings in local and foreign currency on review for a possible downgrade due to longer-term risks associated with the misuse of the debt ceiling instrument, as reported by Reuters.

In this environment, S&P 500 Futures post modest losses while US Treasury bond yields remain under pressure, allowing the US Dollar to nurse its wounds.

Ahead of the US Consumer Price Index (CPI) for April, Tuesday's Australian Federal Budget will be crucial for speculators of the AUD/USD pair. The US Senior Loan Officer Opinion Survey on Bank Lending Practices will also be a key indicator. It is important to note that Tuesday's Australian Retail Sales and China trade data can provide additional guidance to pair traders.