AUD/USD recovers its losses below the 0.6450 mark, eyes on RBA, Fed rate decision

• AUD/USD holds above 0.6445 amid the USD consolidation.
• The market expects the Reserve Bank of Australia (RBA) to keep its rate at 4.10% for a third consecutive month.
• Markets have priced in that the Federal Reserve (Fed) would skip hiking rates in September.
• The RBA and Fed monetary decision will be in the spotlight this week.

The AUD/USD pair recovers its losses after retracing from a two-week high of 0.6473 during the early European session on Monday. The pair is trading at 0.6445, gaining 0.24% on the day. Market players prefer to wait on the sidelines ahead of the monetary poly meeting of the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed).

The Minutes from the RBA are scheduled for Tuesday and the markets anticipate the Australian central bank to maintain its cash rate at 4.10% for a third consecutive month. The latest report from Reuters said that Michele Bullock takes over as the first woman to lead the Reserve Bank of Australia (RBA) on Monday, she will inherit an economy with moderating inflation, robust employment, and continued development. Markets believe Bullock to maintain them in her first meeting as governor next month, and some economists believe her first policy shift would be a rate cut.

On the US Dollar front, the market expects the Fed to hold interest rates steady at its September policy meeting while keeping one more rate hike on the table. Fed Chairman Jerome Powell will later hold a press conference with no major changes expected from the Fed. However, a dovish stance from official might trigger a decline in the US Dollar (USD) and acts as a tailwind for the AUD/USD pair. According to the CME Fedwatch tool, the markets have fully priced in that the Fed would skip hiking rates in September, while odds for a 25 basis point (bps) hike at the November meeting decline to 27%.

On Friday, the Federal Reserve Bank of New York reported that the Empire State Manufacturing Index in August improved to 1.9 from -19 in the previous reading, above the market estimate of a 10 decrease. Additionally, Industrial Production rose by 0.4% MoM from 1% in July, surpassing market expectations. The preliminary Consumer Sentiment Index for September fell from 69.1 to 67.7, per the University of Michigan. Finally, the five-year Consumer Inflation Expectation came in at 2.7% from 3% prior.

Looking ahead, the RBA interest rate decision will take place on Tuesday. The attention will shift to the Fed monetary decision on Wednesday. These events could trigger the volatility in the pair. Traders will take cues from the statement and find trading opportunities around the AUD/USD pair.