AUD/USD resurfaces from 0.6670 as Australian inflation drops to 6.9%

• AUD/USD has sensed buying interest around 0.6670 as Australian CPI has remained lower than projections.
• The Aussie inflation has been trimmed to 6.9% vs. expectations of 7.4% and the prior release of 7.3%.
• The USD Index has shifted its auction profile above the critical hurdle of 106.80 amid a risk-off mood.

The AUD/USD pair has picked bids around 0 .6670 as the Australian Bureau of Statistics has reported a decline in the monthly Consumer Price Index (CPI). The Australian CPI has landed at 6.9% lower than the expectations of 7.4% and the prior release of 7.3%.

A decline in Australian inflation is expected not to force the Reserve Bank of Australia (RBA) to ditch its current 25 basis points (bps) rate hike culture. Earlier, the street was expecting that RBA Governor Philip Lowe would return to a 50 bps rate hike structure on expectations of an increment in the price rise index.

Apart from that, China’s unrest against Covid curbs announced by authorities to curtail the epidemic has kept the Australian Dollar volatile this week. People are in a state of anger and frustration due to prolonged restrictions on the movement of men, materials, and machines under the zero-Covid policy.

As per the latest developments, the Chinese city of Zhengzhou, home to Apple Inc.’s largest manufacturing site in China, said that it was lifting a lockdown of its main urban areas put in place five days ago as Covid cases climbed. The headline could infuse optimism in the Australian Dollar, being a leading trading partner of China.

Meanwhile, the US Dollar Index (DXY) has shifted its auction profile above the critical hurdle of 106.80 in the Asian session. The risk aversion theme is intact and may remain solid as investors have turned nervous ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. This will provide meaningful cues about the likely monetary policy action in December.

Apart from that, the release of other key catalysts such as US Automatic Data Processing (ADP) Employment, Gross Domestic Product (GDP), core Personal Consumption Expenditure (PCE), and the Fed’s Beige Book will be keenly watched.