AUD/USD moves downward toward 0.6400, US Core PCE, Aussie CPI eyed

• AUD/USD trades lower near 0.6420 ahead of economic data from both nations.
• RBA is expected to be dovish on interest rates trajectory; putting pressure on the Aussie pair.
• The hawkish remarks made by Fed officials could bolster the US Dollar (USD).
• Investors await the US Core PCE, seeking further cues on the US inflationary pressure.

AUD/USD retraces the previous session’s gains, trading lower around 0.6420 during the Asian session on Monday. However, the pair received upward support after the release of Australian PMI data on Friday, coupled with the soft US Dollar (USD).

Australia’s PMI data exhibited a modest improvement on Friday. The preliminary S&P Global Services PMI for September reached 50.5, up from 47.8 in August. However, the Manufacturing PMI declined to 48.2 from 49.6 in the previous reading. The Composite Index also showed improvement, rising from 48.0 to 50.2 prior.

The Reserve Bank of Australia's (RBA) Minutes from the September monetary policy meeting suggested that while additional tightening might be required if inflation remains persistent, the argument for keeping the current policy unchanged was stronger.

Furthermore, recent economic data have not significantly altered the overall economic outlook. This dovish stance from the RBA might be undermining the Aussie pair. Moreover, the traders will watch Australia’s Monthly Consumer Price Index (CPI) and Retail Sales data due later in the week.

US Dollar Index (DXY), measuring the Greenback's value against six major currencies, hovers around 105.60 at the time of writing. The index is struggling to gain momentum, which could be attributed to the market caution ahead of the economic data releases from the United States (US).

Investors will closely monitor the US economic calendar, which includes significant data releases such as Consumer Confidence, Durable Goods Orders, Initial Jobless Claims, and the Core PCE, the Fed's preferred measure of inflation.

The annual figure for Core PCE is expected to decrease from 4.2% to 3.9%. These datasets will provide insights into the US economic situation and inflationary pressure, influencing the trading decisions of the AUD/USD pair.

However, the yield on the 10-year US Treasury note has risen to 4.46%, marking a 0.63% increase by the press time. This increase in yields might be supporting the Greenback.

Furthermore, comments from Boston Fed President Susan Collins and US Federal Reserve (Fed) Governor Michelle W. Bowman suggest that further interest rate tightening is possible, emphasizing the need for patience and more rate hikes to control inflation. Rising interest rates could potentially put pressure on the AUD/USD pair.

The Federal Reserve's commitment to maintaining higher interest rates for an extended period to bring inflation back to its 2% target has raised expectations of at least one additional 25-basis-point rate hike by the end of the year.

Additionally, the Fed's "dot plot" now indicates only two rate hikes in 2024, down from the previous forecast of four rate hikes.