AUD/USD prints a fresh seven-week low at 0.6700 as Fed’s battle against US inflation brawls

• AUD/USD has refreshed its seven-week low at 0.6700 amid geopolitical tensions and rising hawkish Fed bets.
• The USD Index has refreshed its day’s high above 104.90 and is expected to recapture the 105.00 resistance.
• A higher-than-projected Australia GDP will accelerate troubles for the RBA.

The AUD/USD pair has refreshed its seven-week low near the round-level support of 0.6700. More downside in the Aussie asset looks favored as investors are channelizing their funds into the US Dollar Index (DXY). Investors are favoring investment in the USD Index to dodge volatility inspired by a revival in consumer spending in the United States and escalating geopolitical tensions.

The USD Index has refreshed its day’s high above 104.90 and is expected to recapture the 105.00 resistance. Western nations are still concerned about the rumors of China’s support to Russia in providing arms and ammunition against Ukraine.

United States National Security Advisor Jake Sullivan said on CNN’s “State of the Union,” China’s stance on the Russian invasion of Ukraine puts it in an “awkward” position internationally and any weapons support to Russia would come with “real costs.”

Risk-perceived assets like S&P500 futures are facing heat of the geopolitical tensions. The 500-stocks futures basket has surrendered the majority of gains earned in morning, portraying further strengthening of the risk-aversion theme. Meanwhile, the return generated on 10-year US Treasury yields is hovering around 3.94%.

Higher-than-projected US consumer spending in January has highlighted the fact that the battle between the Federal Reserve (Fed) and the sticky inflation is getting brawled further. Fed chair Jerome Powell has been left with no other option than to tap hawkish measures to bring down the stubborn inflation.

On the Australia front, recession fears are escalating as inflation is not showing signs of deceleration, which is bolstering the case of further policy tightening by the Reserve Bank of Australia (RBA). This week, Australia’s Gross Domestic Product (GDP) (Q4) numbers will be keenly watched. The quarter GDP is seen higher at 0.9% vs. the former release of 0.6%. This might create more troubles for RBA Governor Philip Lowe as higher activities will favor further hikes.