AUD/USD falls below 0.6600 amid risk-off market mood, Fed policy remains under spotlight

• AUD/USD drops below 0.6600 as Australian Dollar weakens on downbeat Retail Sales data.
• The USD index hovers near 103.50 ahead of US JOLTS Job Openings data for December.
• Going forward, Fed’s monetary policy and Australian inflation data will be keenly watched.

The AUD/USD pair has dropped below the round-level support of 0.6600 in the late European session. The Aussie asset faces sell-off as the market mood has turned downbeat due to deepening Middle East tensions.

S&P500 futures are facing decent losses in the early New York session, portraying a decline in the risk-appetite of the market participants. The US Dollar Index (DXY) remains stuck in a tight range near 103.50 as investors await the United States JOLTS Job Openings data for December, which will be published at 15:00 GMT.

Investors anticipate that US employers posted 8.75 million fresh new jobs, which are slightly down from 8.79 million advertised in November.

However, major focus this week will be on the interest rate decision by the Fed, which will be announced on Wednesday. The Fed is expected to leave interest rates unchanged in the range of 5.25-5.50% for the fourth time in a row. Investors will keenly focus on the interest rate outlook. As per the CME Fedwatch tool, investors are more confident about Fed to start reducing interest rates from May.

Meanwhile, the Australian Dollar has fallen on the backfoot as a sharp contraction in the monthly Retail Sales data for December has softened the inflation outlook. Consumer spending at retail stores were dropped at a higher pace of 2.7% against expectations of 0.9%. In November, Retail Sales were rose by 1.6%.

Ging forward, investors will focus on the Australian Consumer Price Index (CPI) data for the last quarter of 2023, which will be published on Wednesday. Investors see price pressures grew moderately by 0.8% against an increase of 1.2% in the July-September.