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AUD/USD attracts fresh sellers following the previous day’s bounce from over a two-week low.
Geopolitical uncertainties and rising Fed rate hike bets underpin the USD, weighing on the pair.
The RBA’s hawkish outlook fails to inspire the Aussie bulls or lend any support to spot prices.
The AUD/USD pair struggles to capitalize on the previous day's modest recovery from the 0.7120-0.7115 region, or over a two-week low, and meets with a fresh supply during the Asian session on Tuesday. The intraday slide is sponsored by the emergence of some US Dollar (USD) dip-buying, which overshadows the hawkish Reserve Bank of Australia (RBA) and drags spot prices back below mid-0.7100s in the last hour.
In fact, Minutes of the RBA's May policy meeting showed that eight of nine board members backed the rate hike to 4.35%, citing rising inflation risks from the Gulf conflict. Earlier, RBA Assistant Governor Sarah Hunter said that the central bank is worried higher energy costs will feed through to consumer prices quickly, potentially creating a ‌significant shift in inflation expectations. This reaffirms market expectations for a further rate hike at the August RBA meeting, though it does little to benefit the Aussie amid the underlying USD bullish sentiment.
Following the previous day's pullback from its highest level since April 7, the USD Index (DXY), which tracks the Greenback against a basket of currencies, regains positive traction amid a combination of supporting factors. Despite renewed optimism over a potential US-Iran peace deal, investors remain on edge amid broader disagreements over Tehran's nuclear program and the Strait of Hormuz. Apart from this, expectations that the US central bank will raise borrowing costs by the year-end revive the USD demand and weigh on the AUD/USD pair.
The market focus shifts to the release of FOMC Minutes on Wednesday. In the meantime, fresh developments surrounding the Middle East crisis could inject volatility in the markets. US President Donald Trump called off a planned military strike on Iran and said that there is a good chance an Iran nuclear deal can be reached. The muted reaction, however, points to the market skepticism over a quick resolution to the Iran conflict, which might continue to benefit the safe-haven USD and backs the case for a further depreciating move for the AUD/USD pair.#SECTokenizedStockExemption $USDC