AUD/USD finds fresh demand below 0.6250 as risk-on profile emerges, US Inflation buzz

• AUD/USD has extended its recovery to near 0.6250 as the risk-off mood has started fading.
• The DXY is expected to find a cushion around 113.00 as selling pressure accelerates.
• A deadly duo of price pressures and upbeat job data will force the Fed to dictate a bigger rate hike.

The AUD/USD pair has defended the downside bias firmly after sensing a decent buying interest at around 0.6240. The asset has extended its gains to near 0.6280 as the risk-on impulse has emerged. Investors are shrugging off the hawkish Federal Reserve (Fed) pessimism and are underpinning the risk-perceived currencies.

The US dollar index (DXY) is aiming to re-test Tokyo’s knee-jerk reaction to near 113.00 as investors are dumping the safe haven after failing to sustain around fresh weekly highs at 113.60.

This week, the show-stopper event will be the US consumer Price Index (CPI) data, which will release on Thursday. Considering the market expectations, the headline US inflation may trim to 8.1%, as per the expectations. While the core CPI that doesn’t consider oil and food prices may increase to 6.5%.

It is worth noting that September’s employment data was upbeat. The US Nonfarm Payrolls (NFP) was released at 263k, higher than the expectations of 250k. Also, the Unemployment Rate was trimmed to 3.5%. Should the inflation rate accelerate further, odds for a bigger rate hike by the Fed will soar vigorously? The deadly duo of firmer payroll data and mounting price pressures will leave with no other option for the Fed than to continue the current pace of hiking interest rates.

On the Aussie front, Reserve Bank of Australia (RBA) Assistant Governor Luci Ellis has termed the neutral rate as a guide for policy, not a destination, which indicates that the targeted Official Cash Rate (OCR) at 3.85% by the central bank could be adjusted further. She further added that inflation expectations over one year will remain well anchored in a 2-3% range, at the Citi Australia and New Zealand Investment Conference.