AUD/USD slides further to near 0.6560 as US Dollar extends rally

• AUD/USD gains to near 0.6560 as the US Dollar continues to outperform its peers.
• The US government enters in its second week of shutdown.
• Investors await FOMC minutes and Australia's consumer inflation expectations data.

The AUD/USD pair trades 0.2% lower to near 0.6560 during the European trading session on Wednesday. The Aussie pair extends its Tuesday's downside move as the US Dollar (USD) continues to outperforms its peers, following political developments in Japan and France.

During European trading hours, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, posts a fresh two-month high near 99.00.

However, the upside in the US Dollar appears to be limited as the US government has entered in its second week of shutdown.

Meanwhile, investors await the Federal Open Market Committee (FOMC) minutes of the September policy meeting, which will be published at 18:00 GMT. Financial market participants will pay close attention to FOMC minutes to get fresh cues on the monetary policy outlook.

In September, the Fed reduced interest rates by 25 basis points (bps) to 4.00%-4.25% and signaled two more in the remainder of the year. The CME FedWatch tool also shows that traders see an 82% chance that the Fed will cut interest rates by 25 bps in each of its two policy meetings remaining this year.

In Australia, investors await one-year forward Consumer Inflation Expectations data for October, which will be published on Thursday. The inflation expectations data will influence market expectations for the Reserve Bank of Australia's (RBA) monetary policy outlook. In September, 12-months inflation expectations rose at a faster pace to 4.7%.