FX.co ★ Australian Dollar Pares Losses

On Wednesday, the Australian dollar appreciated to approximately $0.643, recovering from the previous session's losses. This gain was bolstered by a weaker US dollar, driven by renewed apprehensions regarding the economic and fiscal landscape. These concerns emerged following the Federal Reserve's cautious commentary, a downgrade of the US credit rating by Moody's, and uncertainties over President Trump's proposed tax cuts. Conversely, the Australian currency faced downward pressure on Tuesday when the Reserve Bank of Australia executed an anticipated interest rate cut and emphasized potential economic challenges. The RBA pointed out a continued moderation in inflation and a reduction in upward risks, with updated projections suggesting that headline inflation will linger around the midpoint of the 2–3% target. Additionally, the bank underscored global trade tensions as a potential hindrance to growth, strengthening the argument for further rate reductions and subsequently impacting the currency. Political instability compounded these setbacks, following a division in the opposition coalition as the National Party withdrew its backing.