AUD/USD consolidates near 0.6500 as focus shifts to RBA policy

• AUD/USD trades sideways near 0.6500 ahead of the RBA policy.
• The near-term demand for the US Dollar is sluggish due to the risk-off mood.
• An interest rate hike of 25 bps is expected from the RBA.

The AUD/USD pair juggles in a narrow range near the psychological hurdle of 0.6500 in the early New York session. The Aussie asset turns sideways as investors await the interest rate decision by the Reserve Bank of Australia (RBA), which will be announced on Tuesday.

The S&P500 opens on a slightly bullish note amid an upbeat market mood due to no further escalation in the Middle East tensions. Israeli Prime Minister Benjamin Netanyahu rejected calls for a ceasefire when met with US Secretary of State Antony Blinken on Friday. Apart from that, expectations that the Federal Reserve (Fed) is done with hiking interest rates have ramped up after soft labor demand.

Meanwhile, the US Dollar Index (DXY) discovers an intermediate support near 105.00 but the near-term demand is sluggish due to risk-off mood and rising bets for interest rates remaining unchanged in the range of 5.25-5.50%. As per the CME Fedwatch tool, traders see more than 90% in favor of an unchanged interest rate decision from the Fed in December.

This week, investors will focus on commentaries from Fed policymakers over guidance on interest rates and outlook on consumer inflation.

On the Australian Dollar front, a Reuters poll showed that RBA policymakers advocate for raising its Official Cash Rate (OCR) by 25 basis points (bps) to 4.35%. This could be the first hike from new RBA Governor Michele Bullock who earlier said the central bank would not hesitate to hike further if inflation continues to remain persist.