The US Dollar faced downward pressure on Tuesday, retreating to 101.50, following a softer than expected Consumer Price Index (CPI) for April. The Australian Dollar, on the other hand, surged by nearly 1.5% against the US Dollar, boosted by improving global sentiment and the easing of US-China trade tensions. Investors now eye further economic data. The market expects that the Federal Reserve (Fed) will maintain its current rate policy through mid-2025.
The Australian Dollar gains traction as the US Dollar weakens as a combination of softer inflation data and trade progress lifts risk-sensitive currencies.
The market now anticipates that the Fed will hold rates steady until at least September 2025 with rate cuts expected to follow.
China's tariff reductions offer relief to the global economy, with Australian exports set to benefit from improved trade relations.
While inflation remains a concern, the data points to a shift toward more dovish expectations for the Fed.
The US economic outlook is clouded by political uncertainties, including President Trump's tax plans and ongoing tariff disputes.

Source: Fxstreet