FX.co ★ Aussie Dollar Slips on Dovish RBA Bets

On Wednesday, the Australian dollar weakened to approximately $0.650 after two days of gains, influenced by increasing anticipation of additional rate reductions from the Reserve Bank of Australia (RBA). Current market sentiment indicates a 97% likelihood of a 25 basis point cut in July, with futures suggesting cumulative cuts totaling 75 basis points to bring the rate to 3.1% by year-end. This outlook is driven by consecutive weak economic data, including a mere 0.2% GDP increase in the first quarter, sluggish consumer expenditure, and declining business investment, heightening concerns that the RBA might have delayed its intervention. Further applying pressure, the US dollar gained strength before the release of critical US inflation figures anticipated later in the day, which may affect the Federal Reserve's rate stance. Despite this, the Australian dollar remains near its year-to-date high, buoyed by positive sentiment regarding US–China trade discussions, which continue to bolster risk appetite and support the currency closely linked to China. Although specific details have not been disclosed, the negotiations have resulted in a preliminary agreement to enact their Geneva consensus, aiming to alleviate trade disputes.