AUD/USD falls to near 0.6500 on dovish RBA minutes

• AUD/USD drops to near 0.6515 as dovish RBA minutes weigh on the Australian Dollar.
• The RBA is expected to cut interest rates at its monetary policy meeting next week.
• The impact of tariffs imposed by Washington has started flowing into the US economy.

The AUD/USD pair faces selling pressure and drops to near 0.6515 on Tuesday. The Aussie pair falls as the Australian Dollar (AUD) underperforms a majority of its peers, following the release of the dovish Reserve Bank of Australia (RBA) minutes of the monetary policy meeting that took place earlier this month.

In the policy meeting, the RBA surprisingly left its Official Cash Rate (OCR) unchanged at 3.85%, while economists had fully priced in a 25 basis points (bps) interest rate reduction.

The RBA minutes showed that policymakers held the OCR steady as they didn't want to send the message that the central bank will follow an aggressive monetary policy stance. Three officials supported the need to cut interest rates as inflation is on track to return to the 2% target.

Meanwhile, traders have become increasingly confident that the RBA will cut interest rates in the August monetary policy meeting due to easing labor market conditions. The Unemployment Rate accelerated to 4.3% in June, the highest level seen since November 2021.

In the United States (US), traders have trimmed their bets supporting interest rate cuts by the Federal Reserve (Fed) in the September monetary policy meeting.

According to the CME FedWatch tool, the probability for the Fed to reduce borrowing rates in the September policy meeting has also reduced to 58.3% from 69.6% seen a month ago. Traders pare Fed dovish bets after the latest Consumer Price Index (CPI) report showed that prices of products that are largely imported in the US have increased.