AUD/USD establishes a three-day advance above 0.6700 with RBA Minutes and central banks in focus
AUD/USD extends The recovery on Friday moved from the annual low. As inflation worries contrast with the risk-negative drivers, hawkish Fed bets, market sentiment declines. Earlier, optimistic measures of Australian consumer confidence, rising stock prices, and rising yields benefited buyers. The RBA Minutes must defend the rate hike track to maintain buyer optimism.

During Tuesday's Asian session, AUD/USD accepts bids to reach a new intraday high near 0.6735, extending the corrective rebound from the yearly low. In doing so, the Australian pair departs from the customary pre-event prudence amid a light schedule and mixed worries.
Nonetheless, the recently released Australia weekly Consumer Confidence, as reported by ANZ Roy Morgan, gained 0.4% week-over-week, but failed to excite AUD/USD bulls as markets fear the Reserve Bank of Australia's (RBA) incapacity to defend aggressive rate moves.
Similarly, the recent decline in inflation expectations and the market's anticipation of the RBA's actions, as well as the People's Bank of China's (PBOC) action, had previously helped AUD/USD purchasers.
Notable is the fact that US inflation expectations, as measured by the 10-year breakeven inflation rate according to the St. Louis Federal Reserve (FRED) statistics, fell for the third consecutive day to a two-month low near 2.34 percent by the end of the North American trading session on Monday. Moreover, according to FRED statistics, the 5-year breakeven inflation rate plummeted to its lowest level since September 2021, at 2.44 percent. Concerns were raised regarding the market's unexpected reaction to the Fed's hawkish wagers. Given the decline in US inflation forecasts, concerns of a short squeeze in the Aussie-U.S. dollar pair garner significant attention and allow the AUD/USD to maintain its strength.
Nonetheless, US President Biden's willingness to support Taiwan in the event that China assaults Taiwan and hawkish expectations for the Fed appeared to weigh on the AUD/USD exchange rate ahead of important monetary policy pronouncements. China's Foreign Ministry stated on Monday, in reaction to US Vice President Joe Biden's remarks, that Beijing "deplores and vehemently opposes this and has lodged strong complaints."
Against this backdrop, the CME's FedWatch tool indicates an 82% likelihood of a 75-basis-point rate hike at Wednesday's monetary policy meeting. In addition, the tool indicates probability of approximately 18% favoring a one percent increase in the Fed's rate. Wall Street ended on a bullish note, which helps S&P 500 Futures post modest gains as traders prepare for the opening of the full markets. In addition, US Treasury rates stay positive near the multi-day peak.
AUD/USD purchasers may be interested in the RBA Minutes and the PBOC's predicted rate decrease before the release of secondary US housing market data. Nonetheless, Wednesday's Federal Open Market Committee meeting warrants the utmost attention (FOMC).
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