AUD/USD is staying afloat around 0.6670s before Fed’s policy decision

• AUD/USD is subdued around the 0.6670s ahead of the Fed’s decision.
• The US Federal Reserve is expected to raise rates to the 4.75% - 5.00% range.
• The RBA’s latest minutes were dovish, as the central bank took off higher interest rate increases.

The Australian Dollar (AUD) holds to its earlier gains against the US Dollar (USD) amidst a so-far dull trading session with traders awaiting the Fed’s decision. Sentiment remains fragile and mixed, while US Treasury bond yields have turned south. At the time of writing, the AUD/USD is trading at 0.6675 after hitting a high of 0.6702.

The Fed is expected to hike, Powell’s press conference eyed

Investors’ mood shifted sour as the time closed to read the Federal Reserve’s monetary policy statement and hear its Chairman Jerome Powell at the stand. Money market futures foresee a 25 bps rate hike, with odds at an 86.4% chance.

Three weeks ago, Jerome Powell opened the door for faster rate hikes before a banking crisis hit the US and abroad. Two lenders in the United States (US) collapsed, while First Republic Bank got aided by 11 banks pledging $30 billion. Late Tuesday, the US Secretary of Treasury Janet L. Yellen calmed the financial markets after stating that the government would intervene to protect depositors of small banks.

That was a green light for traders hungry for risk ahead of the Fed’s decision. Nevertheless, the three major US equity indices are trading below Tuesday’s close by a minimum percentage.

US Treasury bond yields had recovered some ground in the fixed income space, with 2s and 10s almost unchanged at 4.197% and 3.583%, respectively. The greenback is on the defensive, as shown by the US Dollar Index (DXY), down 0.07%, at 103.144.

On the Australian front, the minutes of the last meeting of the Reserve Bank of Australia (RBA) forgot to mention discussions for a higher rate hike, with board members considering only 25 bps. Regarding the strength of the banking system, the RBA’s Governor Kent states that banks are “unquestionably strong.”

AUD/USD Technical levels