• AUD/USD hovers around 0.6823 amid light trading volume on Wednesday.
• The US Core Personal Consumption Expenditures Price Index (Core PCE) for November rose 0.1% MoM and grew 3.2% YoY.
• RBA minutes indicated that any further tightening will depend on the incoming data.
• December's US Richmond Fed Manufacturing Index will be released on Wednesday.

The AUD/USD pair posts modest losses during the early Asian session on Wednesday. However, the downside of the pair remains capped as the dovish Fed narrative is likely to keep the US Dollar (USD) under pressure. The market will be quiet amid the thin trading in the last week of the year. AUD/USD currently trades near 0.6823, down 0.02% on the day.

On Tuesday, the US Dallas Fed Manufacturing Business Index for December came in at -9.3 versus -19.9 prior. Meanwhile, November’s Chicago Fed National Activity Index arrived at 0.03 from the previous reading of a 0.49 drop. The Philly Fed Non-Manufacturing Index improved to 6.3 in December from an 11.0 fall in the previous reading.

The US Bureau of Economic Analysis revealed on Friday that November’s Core Personal Consumption Expenditures Price Index (Core PCE) rose 0.1% MoM and grew 3.2% YoY. The markets reacted little to the report. The Federal Reserve (Fed) is not yet ready to declare victory on inflation, but the slowing in core inflation opens the door for Fed funds rate cuts in 2024. However, the timing will be determined by core PCE figures in the coming months.

On the Aussie front, the minutes of the Reserve Bank of Australia (RBA) suggested that the central bank may hike rates again despite noting “encouraging signs” of falling inflationary pressures across the economy. The minutes added that any further tightening would be dependent on whether incoming data would alter the economic outlook and the evolving assessment of risks.

Later this week, the US Richmond Fed Manufacturing Index for December will be released on Wednesday, and the weekly Initial Jobless Claims will be due on Thursday. The financial markets will stay relatively quiet ahead of the New Year holiday.