AUD/USD Trapped in Tight Range Ahead of Key Data and Fed Decision

AUD/USD remains trapped in a tight range, but the market's calm tone hides a more complicated backdrop. With both Australian inflation data and the next Federal Reserve rate decision approaching, traders are weighing whether this week's events will leave the pair drifting sideways or finally push it out of its recent band.

The Aussie dollar started the week with a gap higher after news that U.S. strikes in Iran had halted, briefly lifting risk appetite and raising hopes of a possible de-escalation in the Middle East. However, this early enthusiasm faded as attention turned back to Wednesday's key Australian consumer price index release and the Federal Reserve's closely watched July rate decision.

Economists expect core inflation to rise 0.9% in the second quarter, pushing the annual pace to 3.7%, and traders are ready to reassess the chances of an RBA hike in August if the data surprises. At the same time, markets largely expect the Fed to leave its benchmark range at 3.5% to 3.75%, making the language of the accompanying statement especially important for understanding whether policymakers are leaning more hawkish or willing to tolerate easier conditions.