The Australian Dollar (AUD) recovers its daily losses against the US Dollar (USD) on Tuesday amid improved risk appetite, driven by the news that the US may scale back its goals for comprehensive reciprocal agreements with trading partners. US President Donald Trump's top trade officials were seeking phased deals with the most engaged countries as they hurried to reach an agreement by the July 9 deadline, when Trump had vowed to reimpose his harshest levies, per the Financial Times.

However, the AUD/USD pair faced challenges as Australia's S&P Global Manufacturing Purchasing Managers' Index (PMI) fell to 50.6 in June from the previous 51.0. The output declined to its lowest reading since February due to adequate client inventories and weaker market conditions, data showed on Tuesday.

China's Caixin Manufacturing Purchasing Managers' Index improved to 50.4 in June from 48.3 in May, according to the latest data released on Tuesday. The reading surpassed the market forecast of 49.0. This is important to note that any economic change in China could impact AUD as both countries are close trade partners.

The AUD/USD pair may regain its ground as the US Dollar continues to face challenges amid growing uncertainty over the Federal Reserve (Fed) policy outlook and a rising fiscal concern in the United States (US). Additionally, traders adopt caution over a sweeping tax and spending bill currently under consideration in the Senate, which could add $3.3 trillion to the national debt.

Source: FXstreet