• AUD/USD retreats from weekly highs amidst strong US economic performance.
• Upcoming Australian CPI data and Fed Chair Powell’s speech to sway AUD/USD.
• Investors bet on softened CPI, weighing the AUD further.

AUD/USD remains in positive territory but retreats from weekly highs of 0.6720, falls below the 0.6700 figure, after upbeat economic data from the United States (US) further cements the case for a rate hike in July, ahead of Federal Reserve (Fed) Chair Jerome Powell speech at Sintra. The AUD/USD is trading at 0.6680, clinging to its minuscule gains of 0.08%.

Solid US data paves the way for a rate hike, pressures AUD/USD

Investors’ sentiment remains positive after a tranche of US data showed the economy’s resilience amidst 500 basis points of tightening. The US Department of Commerce revealed that Durable Good Orders rose above estimates and crushed April’s data, which was upward revised. The figures came at 1.7% MoM, above forecasts of a -1% plunge and April’s 1.2% expansion.

Of late, US New Home Sales grew at the fastest pace over one year, climbing 12.2% MoM in May vs. 3.5% expansion in April. New home Sales hit the 763K threshold, above April’s 680K. At the same time, the Conference Board (CB) revealed that Consumer Confidence in June improved to 109.7, crushing estimates of 104 and above May’s 10.5 figures. The survey showed an improvement in the labor market, with inflation slowing and income expectations downtick.

Given the fundamental backdrop, the AUD/USD erased part of its earlier gains that lifted the major toward its daily/weekly high. Two catalysts that can move the AUD/USD are looming, with Australia’s Consumer Price Index (CPI) release, before Fed Chair Jerome Powell’s speech at Sintra.

Australia’s CPI is expected to soften to 6.1% YoY, lower than April’s 6.8%. Any upward surprises on inflation would dictate the Reserve Bank of Australia’s (RBA) next movement after increasing rates in June to 4.10%. Money market futures portrays a 23% chance the RBA will raise rates to 4.35%.

On Wednesday, Fed Chair Jerome Powell will speak at the European Central Bank (ECB) Sintra event and is expected to reiterate the US central bank eyes two additional rate hikes, but no surprises are on the docket. Despite the Fed dot plots revision of peak rates above 5.50%, the CME FedWatch Tool shows market participants do not believe the Fed will raise rates past the 5.25%-5.50% range