- AUD/USD dips to around 0.6790 in early Wednesday's Asian session.
- Rising geopolitical tensions may pressure the pair, though expectations of a Fed rate cut could limit its decline.
- Investors are closely watching the Australian monthly CPI report, set to be released on Wednesday.
The AUD/USD pair is trading with modest losses around 0.6790 early Wednesday during the Asian session. The risk-off sentiment, driven by escalating geopolitical tensions in the Middle East, is weighing on riskier assets like the Australian Dollar (AUD). Investors are awaiting the release of Australia’s monthly Consumer Price Index (CPI) on Wednesday for further direction.
Heightened geopolitical risks in the Middle East could bolster safe-haven demand, temporarily benefiting the US Dollar (USD). According to local news agency Al Jazeera, thousands of special unit troops have been mobilized for a large-scale operation in the northern West Bank, expected to last several weeks.
However, expectations of a rate cut by the US Federal Reserve (Fed) may limit the USD's upside, offering some support to AUD/USD. The Fed is anticipated to cut rates in September, with a quarter-point reduction expected after Fed Chair Jerome Powell indicated on Friday that it might be time to lower rates.
Meanwhile, consumer confidence in the United States improved in August, with the Conference Board's (CB) Consumer Confidence Index rising to 103.3 from 101.9 (revised from 100.3) in July. Despite this positive data, it had little to no impact on the USD’s valuation.
On the Aussie front, the monthly CPI inflation for July is expected to ease to 3.4% year-on-year from 3.8% in June. A softer-than-expected CPI reading could lead to market speculation that the Reserve Bank of Australia (RBA) might lower interest rates later this year.
