AUD/USD remains on the defensive above 0.6350, focus on US CPI data

• AUD/USD remains on the defensive above the mid-0.6300s in early Monday.
• The US University of Michigan Consumer Sentiment dropped, but inflation expectations rose in November.
• The RBA Monetary Policy Statement said the nation’s inflation has passed its peak, but it is considerably higher than expected.

The AUD/USD pair remains under selling pressure during the early Asian session on Monday. The concern over economic growth in China weighs on the Australian Dollar (AUD) and the higher US Treasury bond yields lift the US Dollar (USD) higher. The pair currently trades near 0.6355, losing 0.07% on the day.

The preliminary US University of Michigan Consumer Sentiment data for November fell to 60.4 from 63.8 in the previous month, the lowest reading this year. Meanwhile, the 1-year inflation expectations rose to 4.4% from 4.2% and the 5-year rose to 3.2%, its highest reading in 11 years.

The markets see a low chance of the Federal Reserve (Fed) raising interest rates again in its December meeting. According to the CME FedWatch Tools, the odds for rate hikes in December dropped to 14.4%. However, Fed Chair Jerome Powell stated that they will not hesitate to raise rates again if it’s necessary. The key economic data this week, including the US Consumer Price Index (CPI) might offer hints about monetary policy guidance.

On the Aussie front, the Reserve Bank of Australia (RBA) released its Monetary Policy Statement (MPS) on Friday, indicating the nation’s inflation has passed its peak, but it remains considerably high and is proving to be more persistent than expected a few months ago. The RBA will bring inflation back to target, but the upcoming data will determine whether additional monetary policy tightening is required.

Looking ahead, market players will monitor the Australian Westpac Consumer Confidence for November on Tuesday. The US Consumer Price Index (CPI) will be a closely watched event by traders. The monthly CPI figure is expected to ease to 0.1% in October from 0.4% in the previous reading, while the core CPI is estimated to remain at 0.3%.