AUD/USD recovers intraday losses in the aftermath of RBA minutes

The AUD/USD pair rebounds from the intraday low of 0.6650 in Tuesday’s European session. The Aussie asset finds strength as the Reserve Bank of Australia (RBA) minutes of the May meeting have suggested that policymakers discussed over raising interest rates further as risks of inflation remaining skewed on the upside for an extended period have deepened.

A mild recovery move in the Aussie asset is also driven by a slight decline in the US Dollar. The US Dollar struggles to come out of the woods despite hawkish guidance on interest rates by Federal Reserve (Fed) officials have weighed on traders’ bets that are in favor of rate cuts in September. The CME FedWatch tool shows a 61% chance that interest rates will come down from their desired levels. The probability has reduced from 65% recorded a week ago.

Cleveland Fed Bank President Loretta Mester said in an interview with Bloomberg on Monday cautioned that risks to inflation have skewed to the upside, which suggests that three rate-cut are not appropriate this year. She emphasized maintaining interest rates at their current levels. She added that they have additional time to gather more data.

Meanwhile, investors shift focus to the Federal Open Market Committee (FOMC) minutes for the May policy meeting, which will be published on Wednesday. Officials view on the interest rate outlook in the May meeting is expected to have remained hawkish as hotter-than-expected inflation in the January-March period indicated that the progress in the disinflation process has stalled.