AUD/USD holds above 0.6700 ahead of the RBA meeting minutes

• AUD/USD oscillates in a narrow trading range around 0.6700 on Tuesday.
• Fed’s Daly said rate cuts may be needed in 2024 to avoid an overtightening.
• The RBA’s forward guidance will depend upon the data and the evolving assessment of risks.
• Investors will monitor the RBA meeting minutes ahead of the US housing data on Tuesday.

The AUD/USD pair consolidates its gains above 0.6700 during the early Asian session on Tuesday. Investors await the Reserve Bank of Australia (RBA) meeting minutes due later on Tuesday, with no surprises expected. At press time, the pair is trading at 0.6704, up 0.01% on the day.

The US Dollar (USD) trades flat in the quiet session. On Monday, San Francisco Federal Reserve (Fed) President Mary Daly said that interest rate cuts may be needed in 2024 to avert overtightening. Daly further stated that more rate cuts could be appropriate if inflation falls faster and that fewer cuts would be warranted if progress in inflation stalls. According to the CME FedWatch Tool, the markets are pricing in the possible rate cuts by March 2024.

The key event this week will be the release of the Core Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred gauge of inflation, which is expected to show an increase of 0.2% MoM and 3.3% YoY in November.

On the Aussie front, the Reserve Bank of Australia (RBA) left interest rates on hold at the final meeting of the year. The meeting minutes from the RBA will be released until the board assembles again in February. The RBA’s forward guidance on interest rates remains unclear with the likelihood of another rate hike dependent on economic data and the bank’s risk assessment.

Market players will keep an eye on the RBA meeting minutes. Later on Tuesday, the US Building Permits and Housing Starts will be due. The US Gross Domestic Product Annualized for the third quarter(Q3) will be released on Wednesday. On Friday, the attention will shift to the Core CPE. These events could give a clear direction to the AUD/USD pair.