AUD/USD posts modest gains above 0.6600 amid weak UoM Consumer Sentiment data

• AUD/USD trades with mild gains around 0.6615 in Monday’s early Asian session.
• The UoM’s Consumer Sentiment Index came in worse than the expectation, declining to 65.6 in May from 69.1. 
• The RBA is anticipated to hold its key interest rate at a 12-year high on Tuesday. 

The AUD/USD pair snaps the two-day losing streak near 0.6615 amid the consolidation of the US Dollar (USD) in Monday’s early Asian session. Meanwhile, the US Dollar Index (DXY) hovers around near 105.50 after retracing from its highest level since early May near 105.80. Investors will closely monitor the Reserve Bank of Australia (RBA) interest rate decision on Tuesday, with no change in rate expected. 

Consumer confidence in the United States deteriorated in early June. The University of Michigan’s Consumer Sentiment Index declined to 65.6 in May from 69.1, below the market consensus of 72. Meanwhile, the one-year inflation expectation held steady at 3.3%, while the five-year inflation outlook rose to 3.1% from 3%. The Greenback preserved its strength after these reports as traders anticipate interest rates will stay higher for longer than expected since inflation expectations remained above the Fed’s 2% target. 

On the Aussie front, the RBA will likely hold its key interest rate at 4.35% at its June meeting on Tuesday as inflation stays hot. The RBA’s Governor Michele Bullock emphasized that she needs to gain confidence that inflation is moving sustainably back to the 2%-3% target and the board isn’t ruling anything in or out. “We expect the RBA to comfortably maintain its somewhat hawkish hold stance,” said Carl Ang, a Singapore-based fixed income analyst at MFS Investment. The hawkish message from the Australian central bank might boost the Australian Dollar (AUD) and cap the downside for the AUD/USD pair.