AUD/USD aims to shift business above 0.6720 on flat core US PCE Inflation data

• AUD/USD is looking to shift its operations above 0.6720 on lower US inflation expectations.
• A decline in demand for durable goods will trim the core inflation price index further ahead.
• The US Dollar Index is expected to remain sideways due to lower volume impacted by the holiday season.

The AUD/USD pair is attempting to shift its auction profile above the immediate resistance of 0.6720 in the early Asian session. The Aussie asset is inclining higher on a flat core United States Personal Consumption Expenditure (PCE) Inflation data. Risk sentiment has turned positive as a decline in the US inflation indicator has secured expectations for a less-hawkish monetary policy by the Federal Reserve (Fed) in CY2023.

The US Dollar Index (DXY) is oscillating in a range of 104.30-104.40 amid less trading activity due to the holiday season. The US Dollar is expected to display a volatility contraction amid the unavailability of a potential trigger ahead, therefore, investors will keep an eye on macro-economic activities for further guidance.

Meanwhile, S&P500 revived on Friday on lower US PCE-Price Index data. The headline US PCE data landed at 5.5%, higher than the expectations of 5.3% but lower than the prior release of 6.1%. While the core PCE data remained in line with expectations. The economic data landed at 4.7% lower than the prior release of 5.0%. This has supported expectations of a small rate hike by the Fed. While the 10-year US Treasury yields remained sideways around 3.75%.

Apart from the softer US PCE data, a significant decline in Durable Goods Orders has raised red flags for the US Dollar. The economic data contracted by 2.1% while the street was expecting a contraction of 0.6%. A decline in demand for durable goods will trim the core inflation price index further ahead.

Meanwhile, Australia’s credit growth is creating worries for the Australian Dollar. A note from ANZ Bank claims that “Private sector credit grew 0.5% m/m in November, in line with market expectations. This is yet another sign of caution in the economy as higher interest rates and inflation bite both households and businesses. Our new forecasts show a sharper slowdown in economic growth through 2023.”