The Australian dollar weakened to around $0.647 on Tuesday, reversing sharp gains from the previous session, after Australia's central bank revealed it had considered an outsized rate cut last month.
During its May policy meeting, the central bank signaled that policymakers had considered a bold 50 bps cut as a form of "insurance" against mounting global trade risks but ultimately opted for a more cautious 25 bps reduction.
Still, markets are now pricing in roughly a 70% chance of another rate cut at the next RBA meeting, although many analysts expect the central bank to wait for Q2 inflation data before taking further action.
Domestically, data showed that Australia's current account deficit narrowed to AUD 14.7 billion in Q1 2025 from a revised AUD 16.3 billion in Q4 2024, albeit larger than market expectations of AUD 12 billion shortfall. Externally, the Aussie dollar also faced pressure from a rebound in the greenback despite mixed economic data and growing trade tensions.
Source: Trading Economi
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