AUD/USD drops to fresh daily low, around mid-0.6500s amid modest USD uptick

• AUD/USD fails to preserve its modest intraday gains amid the emergence of some USD buying.
• The Fed’s hawkish outlook supports elevated US bond yields and is seen underpinning the buck.
• A minor pullback in the equity markets further drives flows away from the risk-sensitive Aussie.

The AUD/USD pair continues with its struggle to find acceptance or build on its strength beyond the 100-day Simple Moving Average (SMA) and attracts some intraday sellers near the 0.6580 region on Friday. The downfall picks up pace during the first half of the European session and drags spot prices to a fresh daily low, around mid-0.6500s amid a modest US Dollar (USD) uptick.

Against the backdrop of persistent geopolitical tensions stemming from conflicts in the Middle East, fading hopes for early rate cuts by global central banks keep a lid on the recent optimism. This is evident from a minor pullback in the equity markets, which assists the safe-haven USD to gain some positive traction and undermines the risk-sensitive Aussie. The Greenback is further supported by the Federal Reserve's (Fed) hawkish outlook, which, in turn, exerts some downward pressure on the AUD/USD pair.

The minutes of the late January FOMC meeting released on Wednesday showed a broad uncertainty about how long borrowing costs should remain at their current level to bring down inflation back to the central bank's 2% target. Adding to this, comments by a slew of influential Fed policymakers suggested that the US central bank is in no hurry to cut interest rates. This remains supportive of elevated US Treasury bond yields and allows the USD to recover further from a nearly three-week trough touched on Thursday.

Moving ahead, there isn't any relevant market-moving economic data due for release from the US on Friday, leaving the USD at the mercy of the US bond yields. Apart from this, the broader risk sentiment might drive demand for the safe-haven buck and provide some impetus to the AUD/USD pair. Nevertheless, spot prices remain on track to register modest gains for the third straight week, though the lack of follow-through buying warrants some caution for bullish traders and before positioning for any further gains.