AUD/USD holds below 0.6400 ahead of Australian Consumer Confidence, US CPI data

• AUD/USD remains capped below the 0.6400 mark in early Tuesday. 
• The New York Fed’s 1-year and 5-year inflation outlooks eased to 3.57% and 2.72%, respectively.
• The US Consumer Price Index (CPI) will be the highlight on Tuesday. 

The AUD/USD pair recovers some lost ground but remains capped under the 0.6400 psychological mark during the early Asian session on Tuesday. Markets turn cautious ahead of the US Consumer Price Index (CPI), due later on Tuesday. This event could offer hints about the progress of inflation toward its 2% target. At press time, AUD/USD is trading around 0.6375, losing 0.05% on the day.

Meanwhile, the US Dollar Index (DXY), an index of the value of the USD measured against a basket of six world currencies, hovers around 105.65 after retreating from 106.00. The US Treasury bond yields edge lower, with the 10-year yield dropping to 4.63% and the 2-year yield falling to 5.03%.

The New York Fed’s survey of consumer expectations showed the 1-year and 5-year inflation outlooks eased to 3.57% and 2.72%, respectively. Meanwhile, the US government reported a $66 billion budget deficit in October, compared to a deficit of $87 billion during the same month of last year. Tuesday’s spotlight will be the US inflation data. The Consumer Price Index (CPI) is expected to grow by 0.1% in October, and the core inflation measure is estimated to remain at 4.1%. These figures might convince the Federal Reserve (Fed) of additional tightening, as FOMC views are warranted by the data. 

On the Aussie front, Reserve Bank of Australia (RBA) Assistant Governor (Economic) Marion Kohler said that a decline in inflation to be slower than previously thought due to the still-high level of domestic demand and strong labor and other cost pressures. Kohler further stated that a tighter policy to counter high inflation is required. The market anticipates that the RBA will hike additional rates in the first half of next year.

Looking ahead, market players will monitor Australia’s Westpac Consumer Confidence and the National Australia Bank's Business surveys. Also, the US CPI data will be due on Tuesday. Later this week, the Australian Q3 Wage Price Index will be due on Wednesday, and the Australian employment report will be released on Thursday.