• The Reserve Bank of Australia Minutes show that further rate hikes remain possible if inflation persists.
• A stronger US Dollar ahead of key US labor market data limits the Australian Dollar's rebound.
• Investors now await the US JOLTS Job Openings report and Nonfarm Payrolls data for fresh policy clues.

AUD/USD trades around 0.6890 on Tuesday, holding steady on the day as investors digest the latest Reserve Bank of Australia (RBA) monetary policy meeting Minutes while remaining cautious ahead of key US labor market data.

The RBA Minutes showed that policymakers view current financial conditions as somewhat restrictive but remain prepared to raise interest rates further if necessary to ensure price stability. The central bank also warned that tensions in the Middle East continue to pose upside risks to inflation while weighing on the economic growth outlook.

These comments provide some support to the Australian Dollar (AUD), although their impact remains limited. Investors believe the central bank now prefers to assess the effects of the monetary tightening already delivered before making further policy adjustments, a view also highlighted by TD Securities.

Meanwhile, economic data from China provided a positive signal for the Australian Dollar. China's official Manufacturing Purchasing Managers Index (PMI) rose to 50.3 in June from 50 previously, beating expectations of 50.1. The Non-Manufacturing PMI also improved to 50.2 from 50.1 in May, above the consensus forecast of 49.9, pointing to continued expansion in the services sector.

Despite the encouraging data from Australia's largest trading partner, the Australian Dollar remains under pressure against the US Dollar (USD). The Greenback continues to attract demand ahead of this week's key labor market releases, with investors focusing on the Job Openings and Labor Turnover Survey (JOLTS) report due later on Tuesday and the Nonfarm Payrolls report later this week.

The US Dollar Index (DXY) therefore remains supported as markets continue to adjust expectations for the Federal Reserve's (Fed) policy outlook. This cautious backdrop is limiting AUD/USD's recovery despite the relatively hawkish tone of the RBA Minutes and signs of resilience in the Chinese economy.