FX.co ★ Australian Dollar Weakens

On Tuesday, the Australian dollar fell to approximately $0.647, erasing significant gains made in the previous session. This decline followed the revelation by Australia's central bank that it had contemplated a substantial interest rate cut last month. During its May policy meeting, the central bank indicated that policymakers had considered executing an aggressive 50 basis point reduction as a precautionary measure against escalating global trade risks. However, they ultimately decided on a more moderate 25 basis point cut. Market expectations currently suggest about a 70% probability of another rate cut in the upcoming RBA meeting. Nonetheless, several analysts anticipate that the central bank will await Q2 inflation data prior to making further adjustments. Domestically, it was reported that Australia's current account deficit decreased to AUD 14.7 billion in the first quarter of 2025, down from a revised figure of AUD 16.3 billion in the fourth quarter of 2024. This outcome, however, was still greater than market expectations of a AUD 12 billion deficit. Externally, the Australian dollar also faced downward pressure from a resurgence of the US dollar, despite the presence of mixed economic data and increasing trade tensions.