• AUD/USD gains sharply to near 0.6640 as the Australian Dollar outperforms across the board.
• The Fed is unlikely to cut interest rates in the January meeting.
• Investors await RBA minutes, and the preliminary US Q3 GDP data.

The AUD/USD pair is up 0.45% to near 0.6640 during the European trading session on Monday. The Aussie pair strengthens as the US Dollar (USD) underperforms its peers, despite traders remaining confident that the Federal Reserve (Fed) will not cut interest rates in the first policy meeting of 2026.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0025% lower to near 98.45.

According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 25 basis points (bps) to 3.25%-3.50% in the January meeting is 22.5%.

Fed dovish expectations remain slim even as the United States (US) Consumer Price Index (CPI) data for November came in lower than projected.

Going forward, investors will pay close attention to the preliminary Q3 Gross Domestic Product (GDP) data, which will be published on Tuesday. Market participants will closely monitor the data to get fresh cues on the current economic status. The US GDP growth is expected to come in at 3.2% on an annualized basis, lower than 3.8% in the second quarter of the year.

Meanwhile, the Australian Dollar (AUD) outperforms its peers as de-anchored consumer inflation expectations have increased hopes that the Reserve Bank of Australia (RBA) could hike interest rates in the near term. On Friday, the data showed that Consumer Inflation Expectations accelerated to 4.7% from the prior reading of 4.5%.

For fresh cues on the Australian interest rate outlook, investors will focus on minutes of the RBA policy meeting, announced on December 9, in which the central bank left its Official Cash Rate (OCR) steady at 3.6%.