AUD/USD clings to gains near 0.6800 as RBA unlikely to cut interest rates this year

• AUD/USD grips gains near 0.6800 as hotter-than-expected Aussie inflation keeps hopes of RBA leaving interest rates steady this year alive.
• Aussie monthly CPI rose by 3.5%, remained higher than estimates of 3.4% but decelerated from the prior release of 3.8%.
• Investors await the Aussie Retail Sales and US core PCE inflation data for July.

The AUD/USD pair holds onto gains near the round-level figure of 0.6800 in Wednesday's European session. The Aussie asset posts a fresh seven-month high of 0.6813 after a hotter-than-expected Australian monthly Consumer Price Index (CPI) for July kept market speculation for the Reserve Bank of Australia (RBA) to leave its Official Cash Rate (OCR) steady at 4.35% for the entire year alive.

The inflation date came in the early Asian session on Wednesday and showed that monthly CPI decelerated to 3.5% from 3.8% in June but remained higher than expectations of 3.5%, which appeared insufficient to bring RBA rate cut expectations on the table.

This week, the Australian Dollar (AUD) is expected to show more action as Aussie monthly Retail Sales data for July is lined up for release on Friday. Economists estimate that Retail Sales, a key measure of consumer spending that prompts price pressures, to have grown at a slower pace of 0.3% from 0.5% in June.

Meanwhile, the US Dollar (USD) regains temporary ground after posting a fresh year-to-date (YTD) low. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, delivers a mild recovery from 100.50 to near 100.85.

Investors see the US Dollar's recovery as a short-lived pullback, with evidence that its near-term outlook is uncertain. The Greenback has remained under pressure as the Federal Reserve (Fed) seems to be prepared to start reducing interest rates from the September meeting, with uncertainty over the likely size by which the central bank will cut its key borrowing rates.

For fresh cues on interest rate cut path, investors await the United States (US) core Personal Consumption Expenditure Inflation (PCE) data for July, which will be published on Friday. The PCE Price Index report is expected to show that the annual core inflation rose by 2.7%, faster than June's reading of 2.6%, with monthly figures growing steadily by 0.2%.