AUD/USD corrects slightly ahead of US inflation data for August

• AUD/USD retraces to near 0.6600 ahead of the US CPI data for August.
• Fed officials expect the tariff-driven inflation to be a one-off.
• Australia's 12-month consumer inflation expectations increased to 4.7% in September.

The AUD/USD pair retraces to near 0.6600 during the European trading session on Thursday from the 10-month high of 0.6636 posted the previous day. The Aussie pair faces slight selling pressure as the US Dollar (USD) trades higher ahead of the United States (US) Consumer Price Index (CPI) data for August, which will be published at 12:30 GMT.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades close to a three-day high around 98.00.

Investors will pay close attention to the US CPI data to get cues about whether President Donald Trump's tariffs are driving inflationary pressures. Lately, a majority of Federal Open Market Committee (FOMC) members, including Chair Jerome Powell, have signaled that the tariff-driven inflation doesn't appear to be persistent.

As measured by the CPI, the US headline inflation is expected to have grown at an annualized pace of 2.9%, faster than 2.7% in July. The core CPI - which excludes volatile food and energy items - is estimated to have risen steadily by 3.1% on year. Month-on-month headline and the core CPI are expected to have grown by 0.3%.

Meanwhile, traders are increasingly confident that the Federal Reserve (Fed) will cut interest rates in the policy meeting next week.

In Australia, Consumer Inflation Expectations for the forward one-year has come in higher at 4.7% on an annualized basis in September against the prior reading of 3.9%. De-anchoring consumer inflation expectations could restrict the Reserve Bank of Australia (RBA) from reducing interest rates further.