AUD/USD steadies around 0.6860 ahead of FOMC statement

Fed will announce interest rate decision tonight. The US dollar holds onto losses, US yields move modestly lower. The AUD/USD pair has retreated after approaching 0.6900.

The AUD/USD is moving sideways around 0.6860, up for the day, ahead of the FOMC decision on interest rates. The pair is about to post the highest daily close since mid-September but critical events lie ahead.

The Fed is expected to slow the pace of interest rate hikes to 50 basis points. The focus will be on the FOMC statement, the macroeconomic forecasts and Powell’s press conference. Analysts will look for clues about the future path of Fed’s policy.

The outcome of the FOMC meeting will play a key role for the US dollar going forward. A more hawkish Fed will likely help USD recover strength while signs about a near-term peak in the rate cycle could boost the AUD/USD pair. On Thursday, Australia will release the November employment report.

The US dollar looks weak ahead of the FOMC statement after falling sharply on Tuesday following a softer-than-expected US CPI reading. In November price pressure continued to ease. Treasuries rallied, the DXY tumbled and AUD/USD jumped to 0.6893, reaching the highest level in almost three months.