FX.co ★ Australian Dollar Extends Decline

On Thursday, the Australian dollar fell below $0.649, continuing its downward trend from the previous day. This decline was driven primarily by deteriorating risk sentiment due to new tariff threats from US President Donald Trump. He stated on Wednesday that he intends to send formal letters to significant trading partners within the coming one to two weeks, detailing unilateral tariffs designed to push countries into trade negotiations. Further pressure on the Australian dollar emerged from the increasing likelihood of additional interest rate cuts by the Reserve Bank of Australia. The market anticipates an 80% probability of a 25 basis point reduction to 3.60% at the meeting on July 8, with projections for further cuts reaching 3.10% by the end of the year. However, Westpac's Chief Economist, Luci Ellis, predicts that the RBA will maintain the current rates in July, opting for reductions in August and November, followed by two more in February and May of next year. Earlier rate cuts may occur if inflation drops and labor market conditions worsen unexpectedly, which could potentially lower the cash rate to 2.85%.