AUD/USD struggles around 0.6500 as Australian inflation cools down, Fed policy awaited

• AUD/USD drops to near 0.6500 as cooling Australian inflation paves the way for interest rate cuts by the RBA.
• The Australian inflation grew moderately by 0.7% in the second quarter of the year.
• Investors expect the Fed to hold interest rates steady for the fifth straight meeting.

The AUD/USD pair falls to near 0.6500 during the European trading session on Wednesday. The Aussie pair faces selling pressure as the Australian Dollar (AUD) weakens, following the release of the Australia Consumer Price Index (CPI) data for the second quarter of the year and June.

The Australian CPI report showed that price pressures have cooled down. In the second quarter, inflation rose at a moderate pace of 0.7%, compared to expectations of 0.8% and the prior reading of 0.9%. On year, price pressures grew at a slower pace of 2.1%, against estimates of 2.2% and the former release of 2.4%.

Cooling inflationary pressures have boosted market expectations that the Reserve Bank of Australia (RBA) will reduce interest rates in the policy meeting in August. The RBA surprisingly held interest rates steady in the policy meeting earlier this month and guided that the monetary policy path remains on the downside.

Meanwhile, the US Dollar (USD) holds onto gains near its monthly high, with investors await the Federal Reserve’s (Fed) interest rate decision at 18:00 GMT. The Fed is expected to leave interest rates steady for straight fifth policy meeting, which indicates that the major driver for the US currency will fresh guidance on the monetary policy outlook.

Lately, a string of Fed officials stated that monetary policy adjustments are inappropriate in the current time as the impact of tariffs imposed by US President Donald Trump on a number of imports has started feeding into prices.