The Australian dollar depreciated past $0.649 on Thursday, extending its decline from the previous session as risk sentiment soured amid fresh tariff threats from US President Donald Trump.
On Wednesday, he announced plans to dispatch official letters to major trading partners within the next one to two weeks, outlining unilateral tariffs aimed at compelling countries to negotiate trade deals.
Adding pressure on the Aussie dollar were rising expectations of further interest rate cuts by the Reserve Bank of Australia. Markets price in an 80% chance of a 25 bps cut to 3.60% at the July 8 meeting, with further reductions to 3.10% expected by year-end.
However, Westpac Chief Economist Luci Ellis expects the RBA to hold rates in July, followed by quarter-point cuts in August and November, with two additional reductions in February and May next year. Earlier rate cuts are possible if inflation and labour market conditions weaken, potentially bringing the cash rate down to 2.85%.
Source: Trading Economics
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