• AUD/USD trades higher around 0.6700 on Tuesday, supported by a modest rebound in the Australian Dollar.
• Expectations of a tighter monetary policy stance in Australia next year continue to underpin the local currency.
• Investors await the Minutes of the Federal Reserve’s December meeting to refine their rate outlook.

AUD/USD trades around 0.6700 on Tuesday at the time of writing, up 0.10% on the day, as markets remain cautious ahead of the release of the Minutes from the December meeting of the Federal Open Market Committee (FOMC), due later in the day. The pair benefits from moderate support to the Australian Dollar (AUD), driven by expectations that the Reserve Bank of Australia (RBA) could maintain a more restrictive bias for longer than other major central banks.

Hawkish expectations surrounding the Australian central bank are underpinned by the still-uncertain inflation outlook. In its latest communication, the Reserve Bank of Australia reiterated that it stands ready to tighten monetary policy further if disinflation were to lose momentum. Against this backdrop, investors will closely monitor upcoming Consumer Price Index (CPI) data, due in January, ahead of the February monetary policy meeting.

On the US side, the US Dollar (USD) is trading without a clear direction as investors await the Federal Reserve (Fed) Minutes. At the December meeting, the Fed cut interest rates by 25 basis points, bringing the target range to 3.50%-3.75%, while signaling that only one additional rate cut could take place in 2026, after three reductions already delivered in 2025.

Beyond the FOMC Minutes, market attention is also starting to shift toward political factors. US President Donald Trump said he would announce the successor to Jerome Powell as Chair of the Federal Reserve in January, a development that could influence monetary policy expectations and, in turn, the trajectory of the US Dollar in the months ahead.