AUD/USD clings to the range-bound theme near 0.6700 ahead of Australian Trade Balance, US CPI data

• AUD/USD hovers around 0.6700 amid the USD weakness. 
• Fed’s Williams said financial markets continue to be highly sensitive to new data. 
• The Australian monthly CPI eased to the lowest rate since January 2022.
• Australian Trade Balance and US CPI will be in the spotlight on Thursday. 

The AUD/USD pair extends the range-bound theme around the 0.6700 mark during the early Asian session on Thursday. Investors await the release of the Australian Trade Balance report on Thursday ahead of US inflation data, as measured by the Consumer Price Index (CPI). AUD/USD currently trades near 0.6699, gaining 0.04% on the day.  

Wednesday’s lack of economic data prompted financial markets to look at the interest rate cuts that central banks have already priced in for the current year. Nonetheless, the US CPI on Thursday might trigger volatility in the market. The markets estimated an increase of 0.2% MoM in headline inflation and 0.3% MoM in the core figure. 

Investors place their bets on five rate cuts in 2024, largely dismissing the Fed forecast of only 75 bps of easing. On Thursday, New York Federal Reserve (Fed) President John Williams said that financial markets continue to be highly sensitive to new data. Williams added that the Fed is in a good place and that the time has come to consider the future of interest rates. The Fed will eventually be compelled to return to neutral policy levels.

The Australian Bureau of Statistics revealed on Wednesday that the nation’s monthly CPI eased to 4.3% YoY in November from 4.9% in the previous reading, the lowest rate since January 2022. These figures supported the view that the cash rate would remain unchanged at its February meeting.

Looking ahead, market participants will monitor the Australian Trade Balance on Thursday, which is projected to see a trade surplus of 7,500M. On the US docket, the US CPI report and weekly Initial Jobless Claims will be released.