• AUD/USD is swinging back and forth around 0.6200 with investors focusing on ISM Manufacturing’s US PMI data.
• The Fed has signaled fewer interest rate cuts this year.
• RBA policymakers need to be confident that inflation will fall in line with their expectations before they decide to cut interest rates.

During Friday’s session in North America, the AUD/USD pair is hovering around 0.6200. The Australian pair is consolidating ahead of December data on the ISM Manufacturing Managers Index (PMI) from the United States (US), which will be released at 15:00 GMT.

Economists expect the manufacturing PMI to remain unchanged at 48.4, suggesting that economic activity is degenerating at a steady pace. Signs of weakening factory activity would boost expectations that the Federal Reserve (Fed) will take a “slower and more cautious” approach to interest rate cuts this year.

In the latest scatter chart, the Fed signaled fewer interest rate cuts this year as policymakers remained upbeat about the U.S. economic outlook. According to the CME FedWatch tool, for the upcoming policy meeting scheduled for January 29, the Fed is expected to leave interest rates unchanged in the range of 4.25-4.50%.

Ahead of the ISM manufacturing PMI data from the US, the US dollar (USD) declines slightly. Still, it’s near its highest level in over two years, with the US Dollar Index (DXY) trading around 109.00.

Meanwhile, the Australian dollar (AUD) is losing ground as investors wait for monthly Consumer Price Index (CPI) data for November, which will be released on Wednesday. The monthly CPI is estimated to have increased by 2.3%, faster than the previous release of 2.1%. Signs of increasing price pressures would force the Reserve Bank of Australia (RBA) to delay plans for a turn towards interest rate cuts.

RBA Governor Michele Bullock said on December 10 that the central bank does not need to see inflation return to the desired range to start cutting the official cash rate (OCR). However, the board must be “confident” that price pressure will return to the central bank’s target of 2%.