AUD/USD steadies around 0.7050 ahead of RBA, Yields look to reclaim 3%

• AUD/USD is oscillating in a nine-pip range as investors are eyeing RBA’s policy.
• Higher inflation in aussie area will push the RBA for a rate hike.
• The 10-year US Treasury yields have kissed the 3% mark for the first time in the last three years.

The AUD/USD pair is hovering around 0.7050 as investors are awaiting the interest rate decision from the Reserve Bank of Australia (RBA), which will be announced in a few hours. As per the market consensus, the RBA will step up its interest rate by 15 basis points (bps) to 0.25%.

A scrutiny of the guidance from RBA Governor Philip Lowe indicates a neutral stance on the monetary policy this time. RBA’s Lowe dictated that the agency will remain data-dependent for any rate hike decision and currently our policymakers do not see any significant price pressures, which could weigh on interest rates. However, the recent print of Australian inflation at 5.1%, much higher than the market forecasts of 4.6%, and the prior print of 3.5% has triggered the odds of a rate hike by the RBA this time.

Meanwhile, the US dollar index (DXY) has witnessed a minor sell-off after failing to sustain above 103.70. On a broader note, the DXY is dedicated to reclaiming its 19-year high print at 103.93. Certainty of a jumbo rate hike by the Federal Reserve (Fed) is underpinning the greenback against other risk-sensitive currencies. The 10-year US Treasury yields have witnessed some profit-booking after kissing the psychological resistance of 3% for the very first time in three years. The Fed is set to tone aggressively hawkish on Wednesday to leash roaring inflation.