AUD/USD recovers as US Dollar consolidates gains, Fed Powell’s speech in focus

• AUD/USD bounces back as the US Dollar gives await its entire intraday gains.
• The market mood remains uncertain ahead of Fed Powell’s speech.
• RBA officials considered further policy-tightening in June but ended keeping interest rates unchanged.

The AUD/USD pair rebounds sharply after correcting to near 0.6630 in Tuesday’s American session. The Aussie asset recovers as the US Dollar (USD) gives away its entire gains generated due to uncertainty ahead of the Federal Reserve (Fed) Chair Jerome Powell’s speech scheduled at 13:30 GMT.

Market sentiment remains risk-averse as Fed Powell will provide fresh cues about when the central bank will start reducing interest rates. S&P 500 futures have posted significant losses in the early New York session. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, retreats to near 105.80.

Investors will keenly focus on Fed Powell’s speech to know about when the Fed will start reducing interest rates. In June’s monetary policy, Fed Powell acknowledged decline in May’s inflation as “encouraging” but reiterated that they need more good data before pivoting to rate cuts.

This week, the major trigger for the US Dollar will be the United States (US) Nonfarm Payrolls (NFP) data for June, which will be published on Friday. The NFP report will indicate the current status of labor demand and the wage growth, which will provide fresh outlook on inflation.

Meanwhile, the Australian Dollar is broadly under pressure even though Reserve Bank of Australia (RBA) minutes for the June meeting were hawkish. Policymakers considered raising interest rates further due to stubbornly higher inflation but ended keeping the Official Cash Rate (OCR) unchanged at 4.35%. Currently investors expect that the RBA would choose the April 2025 as the earliest point to start lowering interest rates.