The AUD/USD pair corrects sharply to near 0.6450 in Tuesday's European session from the five-month high of 0.6500 posted on Monday. The Aussie pair retraces as the Australian Dollar (AUD) underperforms across the board due to a slowdown in business activity in China.
Signs of moderate growth in economic activities in China weigh heavily on the Aussie Dollar, given Australia's significant reliance on its exports to Beijing.

Caixin Manufacturing and Services Purchasing Managers' Index (PMI) data for April have demonstrated that businesses are facing pressure due to the fallout of higher tariffs by United States (US) President Donald Trump. Activities in both the manufacturing and the services sector expanded at a moderate pace. The exports from China to the US are facing a 145% import duty, limiting US companies from buying from their Chinese trading partners.

Domestically, firming expectations that the Reserve Bank of Australia (RBA) will reduce its Official Cash Rate (OCR) in the policy meeting later this month have also pushed the AUD on the backfoot.
Meanwhile, the US Dollar (USD) has recovered a majority of its intraday losses and has turned almost flat, with investors focusing on the Federal Reserve's (Fed) monetary policy decision, which will be announced on Wednesday. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, rebounds from the day's low of 99.50 to near 99.75.

According to the CME FedWatch tool, traders have fully priced in that the Fed will leave interest rates steady in the range of 4.25%-4.50% for the third straight meeting in a row.

Source: fxstreet