AUD/USD consolidates in a narrow range around 0.6430 ahead of US CPI data

• AUD/USD oscillates around the 0.6410-0.6427 region in a narrow trading band.
• Australian consumer confidence data fell into the negative territory in August.
• Traders expected a 93% chance that interest rates will remain steady in September at 5.25%-5.50%.
• Investors will monitor the US Consumer Price Index (CPI) on Wednesday.

The AUD/USD pair oscillates in a narrow range around 0.6425 during the early Asian session on Wednesday. Meanwhile, the US Dollar Index (DXY) hovers around 104.50 after retreating from the 105.00 area. Markets turn cautious ahead of the key US inflation data.

The further upside of the Aussie is capped by the downbeat Australian consumer confidence data, which fell into the negative territory in August. Data released on Tuesday revealed that Australia’s Westpac Consumer Confidence for September fell by 1.5% to 79.7, following a 0.4% drop In the previous reading. The figures fueled concern about the impact of the economic slowdown in China.

Furthermore, US Commerce Secretary Gina Raimondo is set to meet with the CEOs of key American corporations this week, two weeks after visiting China and raising worries about business conditions, per Reuters. The renewed trade war tension between the US and China might exert some selling pressure and act as a headwind for the China-proxy Australian Dollar (AUD).

On the other hand, the higher for longer interest rate narrative in the US might lift the US Dollar (USD) against the Aussie. Traders anticipate a 93% chance that interest rates will remain steady in September at 5.25%-5.50% and a 56% chance that the Fed will hold its current monetary policy unchanged, according to the CME Fedwatch Tool.

Nevertheless, the August US Consumer Price Index (CPI) will be the highlight on Wednesday. The annual figure is anticipated to rise from 3.2% to 3.6%, while the core figure is expected to fall from 4.7% to 4.3%. The data might trigger volatility in the FX market and influence an expectation of the Federal Reserve's monetary policy.

Looking ahead, market participants will closely watch the US Consumer Price Index for August due later in the day. The stronger-than-expected data might convince the Fed to hike an additional rate. On Thursday, attention will shift to the Australian employment data and the US Producer Price Index (PPI) for August. Traders will take cues from these figures and will find trading opportunities around the AUD/USD pair.