AUD/USD braces for key inflation numbers below 0.6300 amid sluggish markets

• AUD/USD grinds near 31-month low amid cautious trading.
• FOMC Minutes unveiled policymakers’ concerns for doing too little, as expected.
• Fresh covid woes, firmer US data challenged risk profile despite a retreat in yields, sluggish equities.
• Aussie Consumer Inflation Expectations, US CPI could direct traders, mostly towards the south amid recession fears.

AUD/USD licks its wounds at the multi-month low, staying mostly unchanged around 0.6280 during Thursday’s Asian session. In doing so, the risk barometer pair portrays the inactive markets ahead of inflation data from Australia and the US.

AUD/USD dropped to a fresh low since March 2020 the previous day before bouncing off 0.6235 amid the US dollar’s pullback and improvement in the market sentiment. However, broad fears and a lack of major surprises, as well as anxiety ahead of today’s key data, kept the quote captive afterward.

The latest Federal Open Market Committee (FOMC) Meeting Minutes failed to impress the US dollar bulls despite showing the policymakers’ hawkish bias amid concerns over more persistently high inflation. The Fed Minutes also mentioned that the participants agreed the Committee needed to move to, and then maintain, a more restrictive policy stance in order to meet the Committee’s legislative mandate to promote maximum employment and price stability.

Elsewhere, US Producer Price Index (PPI) declined to 8.5% YoY in September versus 8.4% expected and 8.7% prior. Further, the Core PPI eased to 7.2% versus 7.3% previous readings and market forecasts.

It should be noted that Minneapolis Fed President Neel Kashkari said on Wednesday that they will have room to assess the economy by moving rates at an "aggressive but not overwhelming" pace, as reported by Reuters. "A judgment call on whether we move in 50 or 75 bps increments on rates," added Fed’s Kashkari.

At home, Reserve Bank of Australia (RBA) Assistant Governor Luci Ellis mentioned, that the central bank’s policy is no longer in an expansionary place. However, comments like, “The neutral rate was a moving target and hard to determine at any stage in time,” seemed to have weighed on the AUD/USD prices earlier on Wednesday.

That said, fresh coronavirus fears from China and Europe, as well as anxiety ahead of today’s US Consumer Price Index (CPI) for September, not to forget Australia’s Consumer Inflation Expectations for October, restricted the AUD/USD pair’s immediate moves.

Moving on, the quote may witness a lackluster session ahead of the Aussie data, expected 5.8% for October versus 5.4% prior, while an upbeat outcome may not impress buyers much due to the RBA’s recent dovish hike. Major attention, however, will be given to the US inflation data wherein the headlines CPI is expected to ease to 8.1% YoY versus 8.3% prior but the more important CPI ex Food & Energy is likely to increase to 6.5% YoY from 6.3% prior and can trigger more downside considering the recession woes.

Technical analysis

Despite the latest rebound from the 31-month low of 0.6235, the AUD/USD pair remains inside a five-week-old bearish channel, between 0.6160 and 0.6430 by the press time. That said, oversold RSI (14) signals limited downside room.