AUD Edges Higher as RBA Keeps Rate Hike Option on Table

During Tuesday's European session, AUD/USD traded near 0.71434, slightly weaker on the day but broadly higher against other major currencies. The pair had earlier touched a two-month high of 0.7129, with the dollar's stabilizing rebound capping further upside for the Australian dollar.

**RBA Hawkish Stance Provides Core Support**

The Reserve Bank of Australia's monetary policy stance remains a key source of AUD resilience. According to market reports, RBA Governor Michele Bullock recently pushed back against dovish interpretations of the latest rate decision, explicitly emphasizing that the board considered both holding rates steady and hiking at its meeting. This rhetoric reinforced expectations that Australian rates will stay elevated for a longer period. Earlier, the RBA held the cash rate at 4.35% in June, noting that despite lower oil prices, inflation remains elevated and cost pressures are gradually passing through to final prices.

**Dollar Rebound and External Factors Intertwine**

AUD/USD gains were constrained by a rebound in the US dollar. Reports indicate that the dollar found buying support after hitting a two-month low, driven by concerns that rising oil prices could reignite US inflation pressures. Markets believe more persistent inflation could force the Federal Reserve to maintain restrictive policy for longer, limiting dollar selling pressure. Additionally, geopolitical tensions around the Strait of Hormuz boosted safe-haven demand for the dollar. Investors are awaiting the upcoming release of the Fed's meeting minutes for further clues on inflation risk assessments and the future rate path.

**Employment Data in Focus Ahead**

Looking ahead, market attention shifts to Australia's July employment data. The figures will provide fresh clues on labor market strength and could influence expectations for the RBA's next policy move. On the technical front, AUD/USD trades above the 100-period moving average at 0.7083, with a positive short-term bias, but a sustained break above recent highs is needed to open up further upside room.