AUD/USD gives back major early gains ahead of Aussie Employment data

• AUD/USD gives up major initial gains, while the US Dollar holds onto gains near a three-week high.
• Traders pare Fed dovish bets as Trump's tariffs have started feeding into prices.
• Investors await the Australian labor market data for June.

The AUD/USD pair surrenders a majority of its initial gains during the European session on Wednesday. Still, the Aussie pair trades 0.10% higher to near 0.6540. The pair snaps three-day losing streak as the US Dollar (USD) struggles to extend its upside after refreshing three-week high on Tuesday.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, holds onto gains near 98.60.

The US Dollar attracted significant bids on Tuesday after the United States (US) Consumer Price Index (CPI) report for June showed acceleration in prices of goods that are majorly imported. Signs of price pressures accelerating led traders to trim their bets supporting interest rate cuts by the Federal Reserve (Fed) in its September monetary policy meeting.

According to the CME FedWatch tool, the probability for the Fed to cut interest rates in the September meeting has reduced to 55.5% from 64.7% seen a week ago.

Meanwhile, investors brace for further increase in inflationary pressures as the impact of tariffs announced by US President Donald Trump on 22 nations is yet to be fed into the economy.

In Australia, investors await the employment data for June, which will be published on Thursday. Economists expect the Australian economy to have added fresh 20K workers. In May, employers laid off 2.5K workers. The Unemployment Rate is seen steady at 4.1%.