AUD/USD extends losses to 0.6750 Fed Powell confirms more rate hikes this year

• AUD/USD has extended its losses to near 0.6750 as more interest rate hikes by the Fed have been confirmed.
• Fed Powell has confirmed that long-term inflation expectations are well-anchored.
• The commentary from new Fed nominees will be in focus.

The AUD/USD pair has stretched its downside momentum to 0.6750 in the early New York session. The Aussie asset is attracted significant offers as hawkish testimony from Federal Reserve (Fed) chair Jerome Powell at Congress is acting as a tailwind for the US Dollar Index (DXY).

S&P500 futures are set to open on a negative note as hawkish Jerome Powell’s testimony has triggered fears of a recession in the United States. Investors have underpinned the risk-aversion theme as higher interest rates by the Fed would weigh heavily on economic activities.

The US Dollar Index (DXY) is showing wild swings in a restricted range around 102.60. Signs of sheer volatility contraction in the USD Index are expected to be followed by a solid breakout. The 10-year US Treasury yields have climbed sharply above 3.76%.

Fed Powell has confirmed that long-term consumer inflation expectations are well-anchored, however, the journey of bringing down inflation to 2% is far from over. All Fed policymakers are in favor of more interest rate hikes this year as the extent of the impact of tight credit conditions on inflation, Employment, and economic activities is uncertain.

Going forward, commentary from new Fed nominees will also be in focus. Governor Lisa Cook and vice chair Philip Jefferson have cleared their intentions that a slowdown in price pressures is their major focus so that the economy can return to sustainable growth.

On the Australian Dollar front, preliminary S&P PMI data (June) will be in focus. As per the preliminary report, Manufacturing PMI is seen declining to 48.1 vs. the prior release of 48.4. Services PMI is expected to drop sharply to 50.1 against the former release of 52.1.