• AUD/USD rebounds from intraday lows after the Reserve Bank of Australia's hawkish hold.
• The RBA says it remains prepared to raise rates further if needed to return inflation to target.
• The US Dollar stays supported ahead of the Federal Reserve's policy decision on Wednesday.

The Australian Dollar (AUD) strengthens against the US Dollar (USD) on Tuesday after the Reserve Bank of Australia (RBA) delivered a hawkish hold at its June policy meeting. At the time of writing, AUD/USD trades around 0.7070 after bouncing from an intraday low of 0.7042.

The RBA kept its cash rate unchanged at 4.35% following three consecutive rate hikes earlier this year. The central bank said "uncertainties remain elevated over the outlook for domestic economic activity and inflation" and added that it "will take necessary steps to meet the inflation target, including raising the cash rate further if needed."

Traders also digested mixed economic data from China. Industrial Production rose 4.5% YoY in May, above market expectations of 4.3%, while Retail Sales fell 0.6% YoY, missing forecasts for a flat reading. The AUD is often viewed as a proxy for the Chinese economy because China is Australia's largest export market.

However, AUD/USD is struggling to extend its gains as the US Dollar holds broadly steady ahead of the Federal Reserve's (Fed) monetary policy announcement on Wednesday. The Fed is widely expected to leave interest rates unchanged in the 3.50%-3.75% range for a fourth consecutive meeting.

While Oil prices have eased in recent days after the United States and Iran reached a framework agreement aimed at ending the war in the Middle East. The earlier surge in energy costs has already pushed US inflation higher, with the Consumer Price Index (CPI) rising to 4.2% YoY in May, its highest level since April 2023.

FXStreet's SpeechTracker average scores show that six of the eleven voting FOMC members are clearly hawkish, with most of the remaining members also leaning hawkish.