AUD/USD surrenders half of early gains ahead of Fed's interest rate announcement

• AUD/USD gives up some of its early gains driven by hot Australian CPI data.
• Investors await the Fed's monetary policy and the Trump-Xi meeting.
• The Fed is expected to cut interest rates by 25 bps to 3.75%-4.00%.

The AUD/USD pair gives back half of its early gains during the European trading session on Wednesday. Still, the Aussie pair trades 0.15% higher around 0.6600.

The Australian Dollar gained sharply earlier in the day, following the release of the Australian Q3 and August's Consumer Price Index (CPI) data. The report showed that inflationary pressures grew by 1.3% on a quarterly basis, faster than estimates of 1.1% and the prior reading of 0.7%.

On an annualized basis, the Australian CPI rose at a faster pace of 3.2% against estimates of 3.0% and the previous release of 2.1%. Meanwhile, the Monthly CPI accelerated to 3.5%.

Hotter-than-projected Australian CPI data has diminished expectations of more interest rate cuts by the Reserve Bank of Australia (RBA) in the remainder of the year.

On the global front, investors await the meeting between United States (US) President Donald Trump and Chinese leader Xi Jinping. The outcome of the meeting will be significant for the Australian Dollar, given that the Australian economy relies heavily on its exports to China.

Meanwhile, the US Dollar (USD) also trades higher ahead of the Federal Reserve's (Fed) monetary policy announcement at 18:00 GMT. Investors will pay close attention to the interest rate outlook as traders have priced in a 25-basis-point (bps) reduction that will push the Federal Fund rate lower to 3.75%-4.00%.

Market participants would also like to know the current status of the US labor market amid the absence of key economic data releases due to ongoing federal shutdown.