The Australian Dollar (AUD) is steadying against the US Dollar (USD), following a two-day rally that lifted AUD/USD back above 0.6500.

With risk-on sentiment returning to markets following Tuesday's confirmation of a ceasefire between Israel and Iran, the Australian Dollar has benefited from easing geopolitical tensions.

However, with prices now recovering above the 200-day Simple Moving Average (SMA), bullish momentum may be beginning to lose steam. As technical and fundamental factors contribute to driving price action, the relative performance of the two economies and interest rate expectations have returned to focus.

Australia's Monthly Consumer Price Index (CPI) data, released on Wednesday, revealed that price pressures continued to ease.
The softer inflation print raised expectations that the Reserve Bank of Australia (RBA) would announce another rate cut in July.

Attention then shifted back to the United States, where markets awaited more comments from Federal Reserve (Fed) Chair Jerome Powell.

As Powell testified before the US Senate Committee on Banking, Housing and Urban Affairs, he continued to express optimism about the US economy. His comments, from Tuesday and Wednesday, have done little to change the projected trajectory for interest rates, at least not for now. This leaves expectations for a Fed rate cut priced in for September, which has offered some support to the US Dollar and Treasury yields.

Although diverging monetary policy should be lifting the US Dollar, the current economic uncertainty and weaker economic data are limiting its gains.

Source: Fxstreet