AUD/USD extends recovery above 0.6750 as investors shrug off pre-US Inflation anxiety

• AUD/USD has stretched its recovery above 0.6750 as the risk-off impulse has lost its traction.
• A decline in November US PPI numbers has resulted in lower consensus for inflation data.
• This week, The speech from RBA Governor and Australian payroll data will remain in focus.

The AUD/USD pair has extended its gains to near 0.6751 in the early Asian session after rebounding from near 0.6730.  The Aussie asset has shown strength and has gauged recovery as investors are shrugging off anxiety ahead of the United States Consumer Price Index (CPI). The US Dollar Index (DXY) has again failed in surpassing the critical resistance of 105.20 and has dropped to near 105.00.

S&P500 manifested a sharp recovery Monday as investors cheered expectations of a slowdown in the current interest rate hike pace by the Federal Reserve (Fed), portraying a recovery in the risk appetite theme. The 10-year US Treasury yields recovered sharply and has overstepped the crucial hurdle of 3.60%.

Investors are keeping an eye on the release of the United States inflation data as it will set the ground for Wednesday’s Fed policy. As per the projections, the headline US inflation is seen lower at 7.3% vs. the former release of 7.7%. Also, the core US inflation that excludes oil and food prices is seen lower at 6.1% against the prior figure of 6.3%. A fresh decline in consensus for US CPI is supported by a sheer drop in US Producer Price Index (PPI) data.

November’s US headline PPI dropped sharply to 7.4% as manufacturers were forced to reduce prices of the end products at the factory gate due to a decline in consumer spending.

On the Aussie front, investors are keeping an eye on the speech from Reserve Bank of Australia (RBA) Governor Philip Lowe, which is scheduled for Wednesday. The speech from RBA Governor will provide cues about the likely monetary policy action in January 2023. Apart from that investors will focus on Thursday’s employment data.