AUD/USD turns sideways around 0.6640 as investors await Fed Powell’s speech

• AUD/USD is in a non-directional phase ahead of Fed Powell’s speech.
• The market mood is showing a decline in risk appetite as central banks are expected to deliver hawkish guidance.
• Australian labor market conditions are still tight and might force the RBA to continue hiking interest rates further.

The AUD/USD pair is demonstrating a sideways auction around 0.6640 in the European session. The Aussie asset has turned sideways after a vertical sell-off inspired by softening of the Australian monthly Consumer Price Index (CPI) beyond expectations.

S&P500 futures are holding losses in London as investors are cautious ahead of speech from central bank governors at European Central Bank (ECB) forum. The market mood is showing a decline in the risk appetite of investors as central banks are expected to deliver hawkish guidance, which would fuel fears of global recession.

The US Dollar Index (DXY) is oscillating in a narrow range around 102.60 as investors have sidelined ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. No doubt, Fed Powell has already announced that the central bank will tighten policy further but at a ‘careful pace’. Despite the consistent softening of United States inflation, current price pressures are still double the desired rate, which can be contained by pushing interest rates further.

Meanwhile, the Australian Dollar is expected to deliver more weakness after a higher-than-expected slowdown in the pace of inflation. Monthly CPI decelerated to 5.7% vs. the estimates of 6.1% and the former release of 6.8%. Thanks to the sharp decline in gasoline prices, which slowed down the pace of inflation.

Inflation has softened more than expected, however, Australian labor market conditions are still tight and might force the Reserve Bank of Australia (RBA) to continue hiking interest rates further. Investors should note that the RBA has already raised its Official Cash Rate (OCR) to 4.10%.