The AUD/USD pair turns sideways in Tuesday’s European session after printing a fresh six-month high at 0.6760 on Monday. The Aussie asset consolidates as investors shift to the sidelines ahead of the Federal Reserve (Fed) Chair Jerome Powell’s semi-annual Congressional testimony, which is scheduled at 14:00 GMT.

Investors expect that Fed Powell will argue in favor of keeping interest rates at their current levels until policymakers get evidence that inflation will return to the desired rate of 2%. In his discussions at the European Central Bank (ECB) Forum on the Central Banking last week, Powell said that the central bank has made some progress in inflation and recent data suggests that disinflation has resumed.

For more clarity on the inflation status, investors will focus on the United States (US) Consumer Price Index (CPI) data for June, which will be published on Thursday. Economists have forecasted that the core inflation, which takes out volatile food and energy items, grew steadily by 0.2% and 3.4% on monthly and annual basis, respectively.

Meanwhile, the market sentiment remains upbeat amid firm speculation that the Fed will start reducing interest rates from the September meeting. S&P 500 futures have posted decent gains in European trading hours. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, gains ground near 105.00.

On the Aussie front, investors expect that the Reserve Bank of Australia (RBA) could tighten its policy further as the disinflation process appears to have reversed. Australia’s monthly CPI rose strongly by 4% in May, which pushed back expectations of rate cuts this year.

Going forward, investors will focus on the China’s CPI data for June, which will be published on Wednesday. It is worth noting that Australia is the leading trading partner of China and a significant change in inflationary pressures in the Chinese economy could influence the Australian Dollar’s (AUD) outlook.

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