AUD Struggles Near 0.7100 Amid Inflation Jitters and Geopolitics

The Australian Dollar (AUD) has failed to regain its footing near 0.7100 against the US Dollar (USD), despite a modest uptick in the Asian session on Tuesday. The AUD/USD pair is now awaiting a break below this key level before extending its previous day's retracement from its highest point since June 5.

The recovery of the USD, which touched a two-month low on Monday, has been driven by inflation jitters stemming from higher oil prices. This has kept bets for at least one interest rate hike by the US Federal Reserve (Fed) on the table, as well as the geopolitical risk premium in play due to the ongoing US-Iran standoff.

President Donald Trump's comments, stating that the US is not seeking an extension of the Memorandum of Understanding with Iran and warning of potential actions against Oman, have added to the tensions. The Reserve Bank of Australia (RBA)'s hawkish outlook could support the Australian Dollar in the coming days, particularly ahead of the release of FOMC Minutes on Wednesday.