AUD/USD advances to 0.6550 posts a USD Index-inspired volatile action, Australian CPI eyed

• AUD/USD has advanced to near 0.6550 as the USD index is facing selling pressure.
• Loud expectations of more interest rate hikes by the Fed are failing to provide a cushion to the USD Index.
• Australian monthly inflation is seen rebounding to 6.4% from the former release of 6.3%.

The AUD/USD pair has jumped to near 0.6550 after a volatile action, which was inspired by the sheer gyration in the US Dollar Index (DXY) in the Asian session. The Aussie asset is expected to remain in action ahead amid the release of the Australian monthly Consumer Price Index (CPI) (April) data, which is scheduled for Wednesday.

S&P500 futures have trimmed decent gains in the Asian session as investors are worried that volatility would remain elevated amid the opening of US markets after an extended weekend. United States investors are expected to react heavily on weekend events such as the US debt-ceiling raise approval for two years and resilient consumer spending, which has accelerated hopes of a continuation of the policy-tightening spell by the Federal Reserve (Fed).

The US Dollar Index (DXY) has dropped below 104.20 as investors are anticipating that a raise in the US debt-ceiling issue is expected to force credit rating agencies to downgrade the long-term credibility of the US economy.

Meanwhile, loud expectations of more interest rate hikes by the Fed are failing to provide a cushion to the USD Index. Consumer spending in the United States economy has rebounded sharply despite higher interest rates from the Fed and easing heat from labor market conditions. Fed chair Jerome Powell could be forced to raise rates further if he finds signs of persistence in the US inflation.

Going forward, Australian inflation will remain in focus. Australian inflation is seen rebounding to 6.4% from the former release of 6.3%. Apart from that, the speech from Reserve Bank of Australia (RBA) Governor Philip Lowe will remain in the spotlight. RBA Lowe is expected to provide interest rate guidance for the June meeting.