AUD/USD holds positive ground below the mid-0.6300s ahead of Australian Retail Sales

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• AUD/USD holds positive ground around 0.6339 in early Monday. 
• US Core PCE eased to 3.7% YoY vs. 3.8% prior, the headline PCE remain unchanged at 3.4%.
• Markets anticipate the Reserve Bank of Australia (RBA) to raise the cash rate at its meeting on November 7.
• The Fed rate decision this week will be a closely watched event. 

The AUD/USD pair kicks off the week in a positive mood below the mid-0.6300s during the early Asian session on Monday. The softer US Dollar (USD) lends some support to the pair. However, rising geopolitical tensions in the Middle East might trigger risk-aversion in the market and drag riskier assets like the Australia Dollar (AUD) lower. The pair currently trade around 0.6339, up 0.06% on the day. 

The Federal Reserve (Fed) is expected to leave rates unchanged at the end of its two-day meeting on Wednesday. Late last month, Fed Chair Jerome Powell said that inflation is still too high, raising expectations for another rate hike by the end of the year. That being said, the higher for longer rate narratives in the US could lift the USD and act as a headwind for the AUD/USD pair. 

On Friday, the Core Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred gauge for inflation, eased to 3.7% YoY from 3.8% while the headline PCE remained unchanged at 3.4%. Additionally, the University of Michigan Consumer Index came in better than expected at 63.8 versus 63.0 prior. However, these figures failed to boost the Greenback against its rivals. 

On the other hand, the recent Australian inflation figures were in line with policymakers’ expectations and the markets anticipate the Reserve Bank of Australia (RBA) to raise the cash rate by 25 basis points (bps) to 4.35% in its meeting on November 7. RBA Governor Michele Bullock commented last week that CPI was a little higher than expected, but it was about where we thought it would come. Bullock further stated that the central bank aims to slow the economy without tipping it into recession.

Apart from this, any signs of economic improvement in China also support market sentiment and might lift the China-proxy AUD this week. Market players will keep an eye on the Chinese PMI data on Tuesday. 

The monthly Australian Retail Sales for September is due later on Monday, which is expected to grow 0.3% from the previous reading of 0.2% rise. Later this week, the US CB Consumer Confidence will be released on Tuesday. The spotlight this week will be the Fed policy meeting and this event could trigger the volatility in the market. Traders will take cues from the events and find trading opportunities around the AUD/USD pair.