AUD/USD wobbles around 0.6520 as investors await RBA's monetary policy decision

• AUD/USD consolidates around 0.6520 as investors shift their focus to the RBA's monetary policy outcome on Tuesday.
• The RBA is expected to cut its OCR by 25 bps to 3.6%.
• Fed dovish expectations have kept the US Dollar on the backfoot.

The AUD/USD pair trades sideways around 0.6520 during the European trading session on Monday. The Aussie pair consolidates as investors await the monetary policy announcement by the Reserve Bank of Australia (RBA) on Tuesday.

The RBA is expected to cut its key Official Cash Rate (OCR) by 25 basis points (bps) to 3.6% as price pressures cooled down significantly in the second quarter of the year. In the last quarter, inflation grew at a moderate pace of 2.1%, the lowest level seen since the first quarter of 2021.

In the July monetary policy meeting, the RBA surprisingly held interest rates steady as officials didn't want to convey that the central bank is on a pre-defined monetary easing cycle.

Meanwhile, the US Dollar (USD) faces selling pressure as traders become increasingly confident that the Federal Reserve (Fed) will reduce interest rates in the September monetary policy meeting. Fed officials have also started arguing in favor of unwinding monetary policy restrictiveness amid growing concerns over the labor market.

Going forward, investors will pay close attention to the US Consumer Price Index (CPI) data for July, which is scheduled to be released on Tuesday. Economists expect the headline and the core CPI - which excludes volatile food and energy prices - rose at a faster pace of 2.8% and 3.0% on year, respectively.

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