AUD/USD gives up early gains as US Dollar rebounds, Fed Powell’s speech eyed

• AUD/USD gives back early gains as the US Dollar recovers intraday losses.
• Investors await Fed Powell’s speech for fresh cues on the monetary policy outlook.
• Australia’s one-year forward Consumer Inflation Expectations rose by 4.8% in October.

The AUD/USD pair surrenders its early gains and flattens around 0.6590 during the European trading session on Thursday. The Aussie pair falls back as the US Dollar (USD) rebounds after an early corrective move, with the US Dollar Index (DXY) recovering to near the two-month high around 99.00 posted on Wednesday.

The US Dollar retraced after the release of the Federal Open Market Committee (FOMC) minutes of the September policy meeting, which showed that officials see more interest rate cuts in the remainder of the year as appropriate. The Fed’s dot plot also showed that policymakers collectively see the Federal Fund Rate heading to 3.6% by the year-end, suggesting that there will be two more interest rate cuts.

In Thursday’s session, investors will focus on the speech from Fed Chair Jerome Powell at 12:30 GMT. Investors will closely monitor Fed Powell’s speech to get cues on how much the ongoing US government shutdown will impact the monetary policy and the economic outlook. Market participants would also like to know about when the labour demand will start normalizing.

On the data front, investors await preliminary Michigan Consumer Sentiment Index and Consumer Inflation expectations data for October, which will be released on Friday.

Meanwhile, the Australian Dollar (AUD) trades broadly firm against its peers on expectations that traders would pare bets supporting more interest rate cuts by the Reserve Bank of Australia (RBA) in the remaining year. RBA dovish bets will likely trim as the consumer inflation is proving to be persistent.

Earlier in the day, the University of Melbourne reported that 12-months forward Consumer Inflation Expectations rose at an annual pace to 4.8% in October from 4.7% in September.