AUD/USD weakens below 0.6600 on Fed Powell's cautious rate outlook

• AUD/USD softens to around 0.6585 in Thursday's early Asian session. 
• Fed's Powell highlighted the balance between jobs and inflation. 
• Traders reduce their bets on an RBA rate cut after hotter Australia CPI inflation data.

The AUD/USD pair loses ground to near 0.6585 during the early Asian session on Thursday. The cautious rate outlook of the US Federal Reserve (Fed) Chair Jerome Powell provides some support to the US Dollar (USD) against the Australian Dollar (AUD). The final reading of the US Gross Domestic Product (GDP) for the second quarter (Q2) will be released later on Thursday.

Fed's Powell struck a cautious tone on further easing on Tuesday, saying that the US central bank needs to continue balancing the competing risks of high inflation and a weak job market in coming policy decisions. His remarks lift the Greenback and create a headwind for the pair. Powell further stated that the interest rates are in a good place to deal with either threat, suggesting he sees no urgency to lower rates aggressively. 

On Wednesday, San Francisco Fed President Mary Daly said that further rate reductions likely will be needed, as the central bank works to restore price stability and provide needed support to the labor market. Meanwhile, Chicago Fed President Austan Goolsbee warned against a series of rate cuts. Traders slightly pared back bets for a Fed rate cut by year-end to about 33%, according to LSEG data. Markets continue to expect no change to policy in the October meeting.

On the other hand, Australia's monthly Consumer Price Index (CPI) inflation rose at the fastest annual pace in a year in August, suggesting some upside to inflation that prompted traders to pare back the bets of imminent policy easing. According to Reuters, prospects for a rate reduction at its November meeting faded to 50% from almost 70% before the data. This, in turn, could underpin the Aussie against the USD in the near term.