The AUD/USD pair consolidates in a tight range near 0.6550 in Monday’s European session. The near-term outlook of the Aussie asset remains vulnerable as weak iron ore prices have dampened the Australian Dollar’s (AUD) appeal.

Lower iron ore prices have negatively impacted foreign flows into Australia as it caters to more than 50% of its global demand. The prices of the base metal dived recently due to its weak demand outlook, with the Chinese economy going through a rough phase amid poor demand conditions. Lack of big bang stimulus announcement in the China’s Third Plenum outcome and an unexpected rate-cut decision by the People’s Bank of China (PBoC) raised concerns over China’s economic prospects. Also, China and Australia are close trading partners.

Domestically, the Australian Dollar will be influenced by the monthly and Q2 Consumer Price Index (CPI) data, which will be published on Wednesday. In the second quarter, price pressures are estimated to have grown steadily by 1%. Annually, Q2 CPI is expected to have accelerated to 3.8% from the former release of 3.6%. This will boost expectations of further policy-tightening by the Reserve Bank of Australia (RBA).

Meanwhile, a significant recovery in the US Dollar (USD) amid caution among market participants ahead of the Federal Reserve’s (Fed) interest rate decision on Wednesday has weighed on the Aussie asset. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 104.55. Investors will keenly focus on the guidance on interest rates as the Fed is expected to maintain the status quo for the eighth time in a row.

Currently, financial markets expect that the Fed will start reducing interest rates from the September meeting and there will be two rate cuts this year. Investors will look for cues about whether policymakers are comfortable with these speculations.

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