AUD/USD Remains Below 0.6500 Prior To The RBA's China Trade Balance Announcement

AUD/USD fluctuates near 0.6490 during the Asian session in anticipation of the Reserve Bank of Australia's (RBA) interest rate decision, which is scheduled for 03:30 GMT. In the preceding session, the pair experienced declines attributable to optimistic US Treasury yields, which aided the US Dollar Index (DXY) in recovering from its two-month low and presently trading near 105.20. Nevertheless, as of the moment of composition, the yield on 10-year US bonds is approximately 4.63% in the negative.

It is widely expected that the Australian central bank will raise interest rates by 25 basis points, potentially as a reaction to the recent Consumer Price Index (CPI) data. A 1.2% increase occurred in the third quarter of 2023, exceeding the market consensus of 1.1%. In addition, the seasonally adjusted month-over-month Retail Sales (MoM) for September in Australia surpassed market expectations by 0.9%, as opposed to the 0.3% forecast.

The attention of market participants is expected to be directed towards Governor Michele Bullock's continued adherence to the recent hawkish position, which implies the possibility of future interest rate increases. Furthermore, major Australian banks, namely ANZ, CBA, Westpac, and NAB, modified their forecasts regarding a rate increase by the RBA in response to the resurgence of inflation and the aggressive statements made by RBA policymakers.

Conversely, in a Monday interview with the Wall Street Journal, Neel Kashkari, the president of the Minneapolis Federal Reserve Bank, stated that he tends to be overly cautious with regard to monetary policy. He would rather overtighten monetary policy than take the risk of failing to adequately align inflation with the 2% target set by the central bank.

Furthermore, on Tuesday, speculators anticipate China's Trade Balance data for October to increase to $81.95B from the previous amount of $77.71B. A surge in the Trade Surplus that exceeds initial projections may have a favourable impact on the AUD/USD pair, considering Australia's substantial position as a key trade partner of China.