AUD/USD at a Crossroads: Fed Meeting and CPI Report to Decide Fate

The Australian dollar's recent recovery is set to face a crucial test this week as key events unfold.

The Federal Reserve meeting and Australia's quarterly CPI report are expected to drive the next major move in AUD/USD, with the central bank's guidance on interest rates a primary focus for traders.

Australia's labour market data has been strong, but elevated underemployment takes some of the shine off the headline figures, making it unlikely that the RBA will be convinced of another rate hike based solely on employment numbers.

The Middle East conflict remains a wildcard for broader market sentiment and risk appetite, with renewed tensions potentially lifting inflation expectations and warranting tighter policy from the RBA.