AUD/USD eyes three-week’s low at 0.7400 amid aggressive Fed’s tightening bets

• AUD/USD sees more downside to near 0.7400 on the Fed's expectation of a tight interest rate decision.
• A preliminary estimate for the US CPI at 8.3% may further raise bets on Fed’s tightening policy.
• The greenback bulls have been underpinned after the RBA kept monetary policy unchanged.

The AUD/USD pair has sensed a short-lived rebound at 0.7428 but is likely to extend losses to near 0.7400 amid elevation in expectation of an aggressive tight monetary policy by the Federal Reserve (Fed) next month.

Rising inflation and a tight labor market in the US economy are aiming for a healthy interest rate hike by the Fed in May’s monetary policy. The US Unemployment Rate has fallen to 3.6% and is been printing below 4% consistently for the last three months, which is indicating an achievement of full employment levels. While the US Consumer Price Index (CPI) will release on Tuesday. A preliminary estimate for the yearly US CPI at 8.3% against the previous figure of 7.9% will be an alarming situation for the market. This will not only elevate an interest rate hike by 50 basis points (bps) but will also force the Fed to act quickly on reducing the balance sheet.

The major witnessed a steep fall after printing a yearly high at 0.7662 last week after an unchanged monetary policy by the Reserve Bank of Australia (RBA) on Tuesday. An unchanged monetary policy by the RBA was highly expected along with a less-dovish stance as inflation in the world economy is soaring faster while the growth rate is not advancing proportionally, thanks to the Ukraine crisis. Also, the RBA policymakers dictated that they didn’t see any price pressure that should compel the central bank to elevate interest rates. Adding to that, the soft labor market is not allowing any requirement to gear up borrowing rates soon.