AUD Weakens as Fed Decision Looms

The Australian Dollar (AUD) trades lower against the US Dollar (USD) as investors await the Federal Reserve's monetary policy announcement, scheduled for 18:00 GMT. At press time, the AUD/USD pair is trading at around 0.7125.

Commerzbank notes that the latest upside surprise in inflation suggests a majority of the Federal Open Market Committee (FOMC) will vote to increase the federal funds rate, which would help alleviate doubts about the Fed's credibility.

The bank also warns that the market reaction will depend not just on the decision itself but also on the updated projections. If the dot plot suggests further hikes are likely, it could confirm a rise in the benchmark interest rate and lead to a stronger US Dollar.