Australian Dollar holds firm amid Fed caution and Iran–Israel diplomatic push

• AUD/USD holds gains within Monday’s range despite a steady US Dollar.

• Ceasefire efforts and possible nuclear talks between Iran and Israel soothe risk jitters.

• RBA mulls publishing unattributed votes to boost policy transparency, decision eyed in July.

• Focus turns to US Retail Sales, Fed rate decision, and Australia’s employment data this week.

The Australian Dollar (AUD) edges higher against the US Dollar (USD) on Tuesday, with the AUD/USD pair holding comfortably within Monday’s trading range. The Aussie’s modest gains come despite a broadly steady Greenback, as traders tread cautiously ahead of the Federal Reserve’s (Fed) interest rate decision due on Wednesday. Meanwhile, signs of easing geopolitical tensions between Iran and Israel offer a slight lift to risk appetite in markets, even as cross-border strikes continue for the fifth consecutive day.

At the time of writing, AUD/USD is up about 0.19% on the day, trading near 0.6533. Despite the mild intraday bounce, price action remains confined within a tight range between 0.6400 and 0.6550. On Monday, the pair briefly tested levels last seen in November 2024, hitting a session high of 0.6552 before paring gains to close lower. The 0.6550 mark continues to act as a stubborn barrier, capping upside attempts in recent weeks.

The conflict between Israel and Iran has intensified, extending to the fifth consecutive day, with Israel reportedly striking more than 100 military and nuclear sites across Iran in a large-scale offensive dubbed Operation Rising Lion. In retaliation, Iran has launched multiple missile and drone attacks on major Israeli cities, resulting in civilian casualties and damage to diplomatic sites. Amid the escalating violence, global leaders are racing to prevent further escalation: the United States, France, and Gulf states are pushing for a ceasefire and a renewed nuclear dialogue, while Russia has offered to mediate by overseeing Iran’s enriched uranium stockpile. Meanwhile, the White House is reportedly considering a potential meeting this week between US Special Envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi, signaling a possible diplomatic opening that has helped keep broader market sentiment relatively stable.

Within Australia, investors are closely monitoring developments at the Reserve Bank of Australia (RBA). According to a government spokesperson, the central bank is considering whether to publish unattributed votes from its newly formed monetary policy board — a step aimed at enhancing transparency in its rate-setting process. The idea, which stems from recommendations made in last year’s independent review of the RBA, is expected to be on the table at the board’s next meeting in July.

Looking forward, market focus shifts to US Retail Sales due Tuesday, the Fed’s interest rate decision on Wednesday, and Australia’s jobs report on Thursday — key events likely to drive AUD/USD volatility in the days ahead.