AUD/USD rebounds from 0.6840 as RBA minutes and PBOC decision comes into picture

• AUD/USD has displayed some recovery from 0.6840 amid a minor correction in the USD Index.
• The overall market mood is extremely cheerful as investors are confident that the Fed won’t hike rates only once this year.
• The release of the RBA minutes will provide a detailed explanation behind the 25 bps interest rate hike.

The AUD/USD pair has shown a recovery move after a correction to near 0.6840 in the early European session. The Aussie asset has got strength as investors are awaiting the release of the Reserve Bank of Australia (RBA) minutes and the interest rate decision by the People’s Bank of China (PBoC).

S&P500 futures have generated some losses in Asia as investors are getting precautionary due to an extended weekend in the United States. The overall market mood is extremely cheerful as investors are confident that the Federal Reserve (Fed) won’t hike rates more than once by the year-end.

The US Dollar Index (DXY) has witnessed some selling pressure and has dropped to near 102.30 as optimism in investors about the United States' economic prospects is improving. On Friday, the University of Michigan reported that the preliminary Consumer Sentiment Index (June) has improved to 63.9 vs. the estimates of 60.0 and the former release of 59.2.

The sheer softening of producer and consumer inflation due to consistent declining gasoline prices has infused optimism among market participants. The street is confident that the Federal Reserve (Fed) won’t hike interest rates more than once this year despite Fed chair Jerome Powell having confirmed two small rate hikes.

On the Australian Dollar front, investors are awaiting the release of the Reserve Bank of Australia (RBA) minutes, which are scheduled for Tuesday. The release of the RBA minutes will provide a detailed explanation behind the 25 basis points (bps) interest rate hike by RBA Governor Philip Lowe. Also, cues about the interest rate guidance will be of key importance.

Apart from that, the interest rate decision by the PBoC will be of significant importance. A dovish guidance is anticipated from the PBoC as the Chinese economy is working on spurting economic activities. It is worth noting that Australia is the leading trading partner of China and an economic recovery in the latter will strengthen the Australian Dollar.