AUD/USD struggles to extend gains above 0.6970 ahead of US Inflation and RBA Lowe’s speech

• AUD/USD is facing soft barricades around 0.6970 ahead of the US Inflation data.
• A surprise rise in the US CPI figure could dampen the market mood
• RBA Lowe’s speech will guide about the likely monetary policy action in March.

The AUD/USD pair showed a firm recovery in Monday’s trading session as investors ignored the consequences of a surprise upside in the United States inflationary pressures and geopolitical tensions amid airborne threats to the US. The Aussie is struggling to extend gains above 0.6970 in the early Asian session, however, the upside looks favored considering the strength in the recovery movement.

The US Dollar index (DXY) was heavily offered by the market participants and surrendered the critical support of 103.00. The USD Index is facing hurdles in reclaiming the 103.00 resistance as the market mood is quite cheerful. S&P500 futures recovered dramatically and displayed strong gains, conveying that investors have digested the uncertainty ahead of the US Consumer Price Index (CPI) data. An improvement in the risk appetite of investors strengthened the risk-sensitive currencies.

After printing a fresh monthly high, the return generated on US Treasury bonds dropped firmly. The 10-year US Treasury yields slipped firmly to near 3.70%.

No doubt, the risk-perceived assets have shown resilience ahead of the US inflation data. However, the recovery move could be faded as a rebound in the inflationary pressures after recognizing a downside trend could dampen the market sentiment.

According to analysts from ING, core inflation is to rise to 0.4% MoM. A 0.4% MoM core CPI print (or possibly even 0.5%) would give the Federal Reserve (Fed) near-term ammunition to argue for a May rate hike. Nonetheless, we think that shelter and cars will contribute to inflation slowing sharply from a mid-second quarter, with weakening corporate pricing power also contributing to getting inflation down to 2% by year-end.”

Meanwhile, the Australian Dollar is likely to dance to the outcome of the speech from Reserve Bank of Australia (RBA) Governor Philip Lowe, which is scheduled for Wednesday. The speech from RBA’s Lowe will provide cues about the likely monetary policy action in March.