AUD Rises After RBA's Hawkish Minutes, Market Eyes Inflation Data

The Australian dollar rose on Tuesday after the latest Reserve Bank of Australia (RBA) meeting minutes revealed a more hawkish stance, with a softer US dollar providing additional support. At the time of writing, AUD/USD was at 0.7163, having rebounded from an intraday low of 0.7137. The pair is currently trading near 0.7165.

**Hawkish Minutes Provide Core Momentum**

The RBA's released meeting minutes showed that board members came close to deciding on a rate hike at their most recent meeting. This rhetoric was more hawkish than market expectations, directly boosting buying in the Australian dollar. The minutes reflected policymakers' vigilance over inflation risks, prompting markets to reassess the future rate path. Ahead of the minutes' release, market pricing for a near-term RBA rate hike was insufficient, so the hawkish signal triggered a rapid correction in the exchange rate.

**Weak US Dollar Adds External Support**

The US dollar index edged lower on Tuesday, opening upside room for AUD/USD. Recent US economic data has been mixed, and market expectations regarding the Federal Reserve's policy direction have wavered, leaving the greenback lacking sustained upward momentum. However, the overall pullback in the US dollar has been limited, with the Australian dollar's gains driven more by its own positive factors. Traders are closely monitoring Fed officials' speeches to gauge the dollar's short-term direction.

**Inflation Data Becomes Next Key Variable**

Market focus has quickly shifted to the upcoming Australian monthly inflation data. If the inflation reading comes in higher than expected, it would reinforce the urgency of RBA rate hikes, potentially pushing the Australian dollar above its recent trading range. Conversely, signs of easing inflation could weaken the hawkish expectations stemming from the minutes, causing the currency to give back some gains. Analysts note that ahead of the data release, AUD/USD may consolidate within a 0.7130 to 0.7180 range.