AUD/USD desires acceptance around 0.7200, investors await RBA policy, US CPI in focus

• AUD/USD holds around the critical support of 0.7190 ahead of RBA’s policy.
• An announcement of a rate hike by 25 bps is expected from the RBA.
• The US inflation is expected to sustain above 8% despite continuous rate hikes by the Fed.

The AUD/USD pair is gauging acceptance near the crucial support of 0.7190 in the Asian session. Investors are awaiting the announcement of the interest rate decision by the Reserve Bank of Australia (RBA) for further guidance, which is due in the European session

Considering the inflationary pressures and subdued employment status in aussie region, RBA Governor Philip Lowe is expected to dictate a hawkish stance on the Official Cash Rate (OCR). As per the market consensus, a rate hike by 25 basis points (bps) should be featured by the RBA.

Taking into account the inflation rate of 5.1% recorded in the first quarter of CY 2022, the RBA should tighten the policy beyond the standard figure of 25 bps. However, the inability to generate sufficient employment opportunities could be dampened further by an extremely tight monetary policy. Therefore, an interest rate hike by a quarter to a percent looks optimal.

On the dollar front, the US dollar index (DXY) is juggling around 102.40 after a sheer upside move from Monday’s low at 101.85. Going forward, investors’ focus will remain on the US Consumer Price index (CPI) data. A preliminary estimate for the annual CPI figure is 8.2% against the prior print of 8.3%. It is worth noting that despite the continuous elevation of interest rates by the Federal Reserve (Fed), price pressures are holding themselves above the 8% figure, which raises concerns over the confidence of the consumers in the US economy.