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• AUD/USD wobbles around 0.6420 as the US Dollar struggles to extend its upside despite the Fed guiding no rush for interest rate cuts.
• Fed Powell warns that risks to higher inflation and unemployment have risen.
• Investors await US-China trade talks in Switzerland on Saturday.

The AUD/USD pair trades flat around 0.6420 during North American trading hours on Thursday. The Aussie pair struggles for direction, while the US Dollar (USD) gives up initial gains.

The US Dollar Index (DXY) rose to near 100.20 earlier in the day, on signals from the Federal Reserve (Fed) that monetary policy adjustments are not appropriate amid uncertainty over the United States (US) economic outlook under the leadership of President Donald Trump. However, the USD Index has flattened around 99.90 at the press time.

The guidance from the Fed that there is no rush for interest rate cuts came after the central bank left them steady in the range of 4.25%-4.50% for the third meeting in a row.

Fed Chair Jerome Powell warned that “risks to inflation and unemployment have skewed to the upside”. Powell said that tariffs so far are “significantly bigger-than-expected” and we will see “higher inflation and lower employment” if large increases in tariffs as announced are “sustained”.

Meanwhile, investors look for trade discussions between the US and China, which are scheduled for Saturday in Switzerland. The meeting of US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer with their Chinese counterparts aims to de-escalate the trade war, not to negotiate a trade deal. Tariffs and counter-tariffs imposed by both nations on each other are very high, and a trade deal cannot be initiated without lowering them.

Any positive outcome from the US-China trade talks will be favorable for both the US and the Australian Dollar (AUD). Given that Australia is the leading trading partner of Beijing, an improvement in China’s economic outlook will strengthen the Aussie Dollar.

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