AUD/USD juggles below 0.6500 ahead of US GDP, risk-on impulse still solid

• AUD/USD is oscillating below 0.6500 as the focus has shifted to the US GDP data.
• The US GDP may report a growth of 2.4% vs. a de-growth of 0.6%.
• The RBA may prefer to hike OCR frequently rather than returning to the 50 bps rate hike framework.

The AUD/USD pair is displaying topsy-turvy moves in a narrow range of 0.6484-0.6500in the early Asian session as investors are awaiting the release of the US Gross Domestic Product (GDP) data for fresh stimulus. The asset is facing a time correction after refreshing its three-week high at 0.6511 amid an improvement in the risk appetite of investors.

The risk profile remained upbeat on Wednesday despite a halt in a three-day buying spree in the S&P500. Weaker guidance on sales growth by tech-giant Microsoft (MSFT) resulted in a correction in the 500-stock basket, however, the upside bias is still solid amid higher targets. In the opinion of economists at Morgan Stanley, the rally in S&P500 could be extended well into the 4000/4150 area.

The US dollar index (DXY) is hovering around 109.70 after a sheer fall as investors ditched the risk-aversion theme ahead of the US Gross Domestic Product (GDP). As per the preliminary estimates, the US economy has expanded at a growth rate of 2.4% in the third quarter of CY2022 against the de-growth of 0.6% recorded earlier.

On the Australian front, soaring inflationary pressures have supported the aussie bulls as the Reserve Bank of Australia (RBA) may return to a higher extent of the rate hiker spell. In October monetary policy, RBA Governor Philip Lowe scaled down the extent of the Official Cash Rate (OCR) hike to 25 basis points (bps) against the spell of 50 bps. The inflation rate surged to 7.3% for the third quarter against the projections of 7.0% and the prior release of 6.1%.

Economists at ANZ Bank cited that “A 50 bps rise in November is possible, but we think the RBA will prefer to hike more frequently than shift back to 50 bps, given the reasoning behind the decision to go 25 bps in October.”