AUD/USD retreats from 0.6530 as a rebound in US PCE supports more rate hikes from Fed

• AUD/USD has sensed selling interest after a short-lived pullback to near 0.6530 amid hawkish Fed bets.
• The overall market mood is quite upbeat as investors are chasing risk-sensitive assets.
• The USD Index reported three consecutive super bullish weekly settlements amid delay in raising US debt-ceiling limit by the White House.

The AUD/USD pair has sensed selling pressure around 0.6525 after a less-confident rebound in the early Asian session. The Aussie asset is expected to face more offers as the US Dollar Index (DXY) is anticipated to shift in the bullish trajectory for a longer term after a rebound in Federal Reserve’s (Fed) preferred inflation gauge.

S&P500 futures showed a stellar show on Friday supported by solid gains in technology stocks. Investors went heavily for US equities on expectations that the United States economy won’t show a default for obligated payments by the Federal government. The overall market mood is quite upbeat as investors are chasing risk-sensitive assets.

The US Dollar Index reported three consecutive super bullish weekly settlements amid a delay in raising the US debt-ceiling limit by the White House. Lengthy negotiations among the White House and Republican leaders have put US Treasury on its toes. Discussions on the US borrowing cap limit raise were productive this weekend as associated parties agreed that $31.4 trillion debt ceiling will be raised for two years but non-defense spending should match last year’s spending budget.

Investors should note that the US markets will remain closed on Monday on account of Memorial Day.

On Friday, the release of the monthly Personal Consumption Expenditure (PCE) Price Index (April) showed an acceleration of 0.4% as expected by the market participants. The annual figure rose to 4.4% vs. the estimates of 3.9% and the prior release of 4.2%. A solid recovery in households’ consumption expenditure strengthened the odds of more interest rate hikes by the Federal Reserve (Fed).

Meanwhile, the Australian Dollar remained in action after the release of stagnant monthly Retail Sales data (April). The street was anticipating an expansion by 0.2% while previously it expanded by 0.4%. A decline in households’ demand is expected to strengthen the odds of a neutral interest rate policy stance by the Reserve Bank of Australia (RBA) for June’s monetary policy meeting. Higher interest rates and the cost of living forced Australian households to cut their spending sharply.