The Australian Dollar (AUD) edges higher against the US Dollar (USD) on Wednesday, rebounding after falling more than 0.50% in the previous session. The AUD/USD pair gains ground as the US Dollar extends its decline, pressured by cautious remarks from Federal Reserve (Fed) officials regarding the economic outlook and business sentiment.

Speaking at a panel discussion hosted by the Federal Reserve Bank of Atlanta, San Francisco Fed President Mary C. Daly and Cleveland Fed President Beth Hammack expressed growing concerns about the US economy. While key economic indicators remain solid, both officials pointed to deteriorating business and consumer confidence, attributing part of the sentiment shift to US trade policy.

The Reserve Bank of Australia (RBA), at its May policy meeting, lowered its Official Cash Rate (OCR) by 25 basis points, from 4.1% to 3.85% — a move widely anticipated by markets. In a press conference following the decision, RBA Governor Michele Bullock emphasized the importance of curbing inflation and reaffirmed confidence in the central bank's strategy. Bullock characterized the rate cut as a proactive, confidence-boosting measure appropriate for current economic conditions. She also noted the Board's readiness to take further steps if needed, hinting at the possibility of future adjustments.

Political instability in Australia also weighed on the AUD. The opposition coalition dissolved after the National Party withdrew from its alliance with the Liberal Party. Meanwhile, the ruling Labor Party capitalized on the turmoil, returning to power with a stronger and broader mandate.

Source: Fxstreet