Aussie unchanged ahead of Lowe, CPI

• RBA Governor Lowe testifies before a Senate Committee
• Australia to release CPI
• US debt ceiling deal likely to be approved by Congress

The Australian dollar is drifting lower on Tuesday. AUD/USD is trading at 0.6538 in Europe, unchanged on the day.

RBA Governor Lowe testifies before a Senate Committee later today. Lawmakers will likely press Lowe about rate policy and the battle against inflation. Earlier this month, the RBA shocked the markets by delivering a 25-basis point hike. At the April meeting, the RBA had paused in order to assess the effect of its aggressive rate-hike cycle, and the markets had expected another pause at the May meeting. Lowe will have to reassure the committee that the RBA is following a plan and is not zig-zagging between hikes and pauses.

Attention will quickly shift to inflation, with the release of Australian CPI on Wednesday. Inflation has been falling, and the downturn is expected to continue, with a consensus estimate of 6.4%, down from 7.0% prior. The RBA has pledged to bring inflation back down to its 2% target, but there's no doubt that it will be a long and bumpy road. The central bank meets on June 6^th and is widely expected to pause and maintain the benchmark rate at 3.85%.

The US debt ceiling agreement is a done deal. Well, almost. President Biden and Republican Speaker McCarthy have reached an agreement in principle which must be ratified by both houses of Congress. Some Republicans have threatened to vote against the deal, but with overwhelming support from the Democrats, approval of the deal is very likely. The weeks of uncertainty prior to the deal weighed on risk appetite, and the big winners have been US Treasury yields and the US dollar.

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AUD/USD Technical

• There is resistance at 0.6665 and 0.6756
• 0.6525 is a weak support line, followed by 0.6434