AUD/USD takes a breather near 0.6400, focus on China’s inflation

• AUD/USD holds its position above 0.6400, attempting to halt the losing streak.
• Risk appetite is impacted by Fed officials’ resistance against lowering interest rates.
• China’s inflation is expected to decline by 0.1% from the previous neutral readings.

AUD/USD looks to snap the three-day losing streak, treading water near 0.6400 during the Asian session on Thursday. The pair faces challenges as investor confidence dwindles due to US Federal Reserve (Fed) officials pushing back against the idea of lowering interest rates. This resistance creates a ripple effect, impacting risk appetite across the financial terrain.

Neil Kashkari, the President of the Minnesota Fed, raised doubts about whether the Fed had increased rates sufficiently, citing the economy's resilience. He also mentioned that the Fed might implement another rate hike if inflation rises. Fed Governor Michelle Bowman echoed some of these sentiments, expressing the need for additional rate hikes.

The US Dollar Index (DXY) struggles to continue the winning streak in the third session due to the decline in long-term US Treasury yields. The yield on a 10-year US bond coupon trades at 4.49% by the press time.

The markets are in a hush this week, with investors holding their breath for new cues before making any moves ahead of the upcoming Federal Reserve (Fed) decision in December. All eyes are now on next week's release of October inflation figures from the United States (US).

The AUD/USD pair was under downward pressure after the Reserve Bank of Australia (RBA) recently delivered a dovish rate statement right after the policy decision. The RBA, aligning with a data-dependent strategy, is responding to a slowdown in the Australian economy, with consumer spending staying subdued amid lingering inflation concerns.

Economists over at the National Australia Bank (NAB) are eyeing another 25 basis points hike in February, basing their prediction on Q4 inflation data. Moreover, NAB doesn't foresee rate cuts kicking in until November 2024. Yet, the market is on the lookout for signals, eagerly awaiting clues on whether upcoming data releases will prompt the RBA to consider additional rate hikes.

Thursday brings the eagerly awaited weekly Jobless Claims report. Meanwhile, Fed Chair Jerome Powell is set to join a panel discussion later in the day, focusing on "Monetary Challenges in a Global Economy." China’s inflation data will also be eyed in the Asian session, with expectations of a 0.1% decline compared to the neutral readings reported in the previous assessment.