AUD/USD trades higher around 0.6550 ahead of RBA's monetary policy announcement

• AUD/USD rises to near 0.6550 as the Australian Dollar outperforms ahead of RBA's policy.
• The RBA is expected to hold interest rates steady at 3.6%.
• Easing Fed dovish expectations strengthen the US Dollar.

The AUD/USD pair trades 0.11% higher around 0.6555 during the European trading session on Monday. The Aussie pair gains as the Australian Dollar (AUD) outperforms its peers ahead of the monetary policy announcement by the Reserve Bank of Australia (RBA) on Tuesday.

Economists expect the RBA to hold its Official Cash Rate (OCR) steady at 3.6% as the Q3 Consumer Price Index (CPI) data showed last week that inflationary pressures grew at a faster-than-expected pace at both consumer and the wholesale level.

The Australian Bureau of Statistics reported last week that the Producer Price Index (PPI) grew by 1% in July-September period, faster than estimates of 0.8% and the prior reading of 0.7%. In the same period, the consumer inflation rose at a faster pace of 1.3% against estimates of 1.1% and the prior reading of 0.7%.

Though investors have underpinned the Australian Dollar against the US Dollar (USD), the latter also trades higher amid receding Federal Reserve (Fed) dovish expectations.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, posts a fresh the three-month high near 99.90.

According to the CME FedWatch tool, the probability of the Fed to cut interest rates by 25 basis points (bps) to 3.50%-3.75% in the December meeting has eased to 67.8% from 94.4% seen a week ago.