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AUD/USD snaps its two-day losing streak, advancing to near 0.6570 during the European session on Monday. The pair found upward support as the US Dollar (USD) retreated amid lower US Treasury yields. However, caution prevails among market participants ahead of the Reserve Bank of Australia's (RBA) policy decision scheduled for Tuesday.

The US Dollar Index (DXY) is hovering around 103.40, with the 2-year and 10-year US Treasury yields at 4.71% and 4.29%, respectively, by the press time. On Friday, increases in US yields, were driven by a hawkish sentiment surrounding the Federal Reserve. The Fed is anticipated to uphold its elevated interest rates at Wednesday’s meeting in response to recent inflationary pressures.

The Australian Dollar (AUD) might have received upward support as the S&P/ASX 200 Index recovered from its losses, although the Australian equity market faced challenges during Asian hours due to softer commodity prices.

According to Bloomberg, Westpac anticipates the Reserve Bank of Australia to maintain its cash rate at 4.35% at Tuesday's meeting. RBA Governor Michele Bullock recently highlighted that inflation in Australia is primarily "homegrown" and "demand-driven," attributed to the strength of the labor market and increasing wage inflation. The RBA does not foresee this phenomenon occurring until 2026.

Additionally, investors also await interest rate decisions from both the People's Bank of China (PBoC). Chinese Retail Sales (YoY) increased by 5.5% in February, surpassing expectations of 5.2% and the previous reading of 7.4%. Additionally, Chinese Industrial Production (YoY) rose by 7.0%, compared to the market expectation of a 5.0% figure in February and the previous reading of 6.8%.

AUD/USD

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