Australian Dollar gains ahead of RBA Governor Bullock’s speech

AUD/USD inches higher after recovering its daily losses, trading around 0.6990 during the Asian hours on Tuesday. Traders are keeping a close watch on scheduled remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock later in the day. Meanwhile, lingering concerns over sticky inflation have kept investor sentiment cautious ahead of Australia's June and Q2 consumer price reports due on Wednesday.

The AUD/USD pair could face challenges as the US Dollar (USD) stabilizes, driven by market caution ahead of the upcoming Federal Reserve policy decision due on Wednesday. According to the CME FedWatch Tool, markets are pricing in nearly a 38% chance of a rate hike in July, an unusually high level of uncertainty so close to a meeting. Citadel Securities expects the Fed to deliver a rate increase to solidify Chairman Kevin Warsh’s inflation-fighting credibility following his repeated promises to restore price stability. Looking further ahead, the probability of at least a 25-basis-point hike in September currently sits at approximately 81.4%.

The Greenback showed resilience despite President Donald Trump stating that the US is engaged in "good talks" with Iran to resolve the Middle East conflict. While Washington suspended its 13-night strike campaign over the weekend, leading to three consecutive days without attacks. Tehran’s foreign ministry countered that no direct negotiations with the US are taking place, noting its only active dialogue is with Oman regarding the future of the Strait. Even so, the diplomatic developments helped push oil prices down, easing broader inflation and monetary policy concerns.