AUD/USD posts modest gains above 0.6600, investors await fresh catalysts

• AUD/USD trades with mild positive bias near 0.6605 on Monday. 
• Fed officials reiterated on higher-for-longer mantra, supporting the USD against its rivals. 
• Australia's government stated inflation could moderate to the RBA's target range by the end of 2024, faster than predicted in December.

The AUD/USD pair posts modest gains around 0.6605 during the early Asian session on Monday. Investors await the key US economic data this week for fresh catalysts, including the Consumer Price Index (CPI), Producer, Price Index (PPI), and Retail Sales. 

On Friday, San Francisco Fed President Mary Daly highlighted the need for prolonged restrictive policy to achieve the Fed's inflation targets. Meanwhile, Atlanta Fed President Raphael Bostic said that the central bank is probably still planning to cut its interest rates this year, despite the uncertain outlook. The cautious approach from the US Federal Reserve (Fed) provides some support for the US dollar (USD). 

Elsewhere, consumer sentiment tumbled as inflation fears rose, according to the University of Michigan Survey on Friday. The initial reading of the Consumer Sentiment Index came in at 67.4 in May from 77.2 in April, weaker than the expectation of 76.0. The one-year inflation outlook jumped to 3.5%, while the five-year outlook rose to 3.1%. Both figures registered the highest level since November 2023. 

On the Aussie front, Australia’s Treasury said on Sunday that they projected that inflation could return to the Reserve Bank of Australia’s (RBA) target band before the end of 2024. In the December outlook, the officials projected CPI inflation to slow to 3.75% by mid-2024 and 2.75% by mid-2025, putting it back in the RBA target band.