AUD/USD hovers near 0.6400 ahead of Fed Powell’s remarks

• AUD/USD drops close to 0.6400 amid caution ahead of Powell’s speech.
• Fed Powell may deny rate cuts in the near term as robust retail demand and stable labor market.
• The Australian Dollar faced pressure as the Chinese economy shifted into deflation.

The AUD/USD pair remains on the backfoot near the crucial support of 0.6400 as investors await for Federal Reserve (Fed) Chair Jerome Powell’s remarks on interest rates and the outlook on the US economic performance in the fourth quarter of 2023.

The S&P500 opens on a cautiously positive note as investors worry about the Fed’s guidance on the last monetary policy meeting of 2023. Fed Powell is expected to lean towards keeping interest rates higher for a longer period to ensure that inflation must come down to 2%.

The US Dollar Index (DXY) aims to recapture the immediate resistance of 106.00 on hopes that the Fed Powell would deny rate cuts in the near term as robust retail demand and stable labor market conditions could keep fears of higher consumer inflation expectations unabated. 10-year US Treasury yields hold recovery near 4.56% ahead of Powell’s speech.

This week, investors focused on commentaries from Fed policymakers due to the light economic calendar. Next week, the US inflation data for October will remain in the spotlight. The impact of inflation data would be light as one more inflation report will be released before December’s monetary policy meeting.

Meanwhile, the Australian Dollar faced pressure as the Chinese economy shifted into a deflation in October. The annual deflation rose by 0.2% against 0.1% as expected. Producers cut prices of goods and services at factory gates due to weak consumer spending. Being a proxy to China’s economic prospects, the Australian Dollar remains on the backfoot of deflation pressures.