FX.co ★ Australian Dollar Edges Up on US-China Trade Optimism

The Australian dollar climbed above $0.642 on Monday, marking its second consecutive session of gains. This rise was spurred by advancements in US-China trade discussions over the weekend, which enhanced investor appetite for riskier assets. Negotiations in Switzerland resulted in US officials announcing a deal focused on reducing the trade deficit, while Chinese authorities acknowledged reaching an "important consensus." Despite these positive developments, US Commerce Secretary Howard Lutnick indicated that the baseline 10% tariff on other countries is likely to "remain in place for the foreseeable future." Given Australia's significant export connections to China, it is particularly affected by US-China trade dynamics. Furthermore, the easing of global trade tensions has led investors to reevaluate their predictions regarding domestic interest rate reductions. Currently, markets predict that the Reserve Bank of Australia (RBA) will lower the cash rate to approximately 3.1% by the end of the year, an increase from earlier projections of 2.85%. Nonetheless, the RBA is still anticipated to announce another 25 basis point cut at its meeting scheduled for next week.