Forex Today: RBA delivers a dovish hike, US Dollar extends rebound

Here is what you need to know on Tuesday, November 7:

The Australian Dollar came under heavy selling pressure early Tuesday even though the Reserve Bank of Australia (RBA) raised its policy rate by 25 basis points to 4.35% after the November policy meeting. Meanwhile, the US Dollar Index extended its rebound toward 105.50 after closing in positive territory on Monday. September Goods Trade Balance data will be featured in the US economic docket. Investors will pay close attention to comments from central bank officials as well.

The RBA's rate hike came in line with the market expectation but the policy statement language saw a dovish tweak. "Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable time frame will depend upon the data and the evolving assessment of risks," the RBA said and caused the AUD to weaken against its rivals. At the time of press, AUD/USD was down nearly 1% on the day at around 0.6420.

In an interview with ABC News,  Israeli Prime Minister Benjamin Netanyahu said that Israel will not allow a general ceasefire until all hostages are released by Hamas but added that he was open to 'short pauses'. Meanwhile, news outlets reported that the UN Security Council failed to reach an agreement on a draft resolution to end the conflict following a private session on Monday. Markets seem to have adopted a cautious stance early Tuesday, with US stock index futures losing about 0.3% in the European session.

In the early trading hours of the Asian session, the data from China revealed that the trade surplus narrowed to $56.53 billion in October from $77.71 billion in September. On a yearly basis, Exports declined by 6.4% while Imports rose by 3%.

Following Monday's choppy action, EUR/USD started to edge lower on Tuesday and the pair was last seen trading in negative territory slightly below 1.0700. Germany's Destatis reported that Industrial Production fell by 1.4% on a monthly basis in September.

GBP/USD climbed to its highest level in over a month above 1.2400 on Monday but reversed its direction to end the day in the red. Early Tuesday, the pair continues to stretch lower toward 1.2300. 

USD/JPY closed above 150.00 on Monday and preserved its bullish momentum early Tuesday. As of writing, the pair was up 0.3% on the day at 150.50.

Gold came under pressure at the beginning of the week as the US Treasury bond yields staged a rebound. XAU/USD stays on the back foot and was last seen trading at a 10-day low near $1,970.