AUD Gains on Fading Fed Rate Hike Bets and Geopolitical Tensions

The Australian dollar has continued its upward trend for a third consecutive day, trading around 0.7110 during Asian hours on Tuesday. This gain is largely attributed to the subdued state of the US dollar, which remains weak amid declining expectations of further rate hikes by the Federal Reserve.

A recent decline in July's US Nonfarm Payrolls and modest consumer price inflation data have significantly reduced market anticipation of an interest rate increase next month. As a result, expectations for a Fed rate hike at the upcoming policy meeting have dropped to 35%, down from 47% a month earlier, according to the CME FedWatch Tool.

Geopolitical tensions between the US and Iran are also influencing market dynamics following statements from both sides on Monday. However, strategists at Brown Brothers Harriman believe that Australia's upcoming data releases may not significantly impact the Reserve Bank of Australia's (RBA) rate expectations.