Risk aversion is driving markets on Monday, as markets brace for the reintroduction of April's "Liberation Day" tariffs and the Aussie Dollar dives on a mix of fears of higher levies on exports to the US and a generalised disruption of global trade.

Australia's economy is strongly dependent on international trade, and the uncertainty about the global trade outlook is hurting confidence in its currency. The AUD/USD accelerated its decline today and is losing about 0.9% in its third consecutive bearish day.

Risk-sensitive currencies suffer with US tariffs looming
Investors are rushing for safety on Monday, boosting the US Dollar's recovery as Trump prepares letters to announce some of its trading partners the levies that will be applied to their products. Which one are those countries is still unclear, as US Administration officials touted imminent agreements with some countries, and so is the deadline, as Treasury Secretary Bessent flagged a moratorium to August 1.

Currency markets, however, are expected to remain driven by a negative risk sentiment in the absence of key data to ease investors' mood.

On Tuesday, the Reserve Bank of Australia is expected to trim its benchmark interest rate by 25 basis points and his highly likely to deliver a dovish message, pointing to the downside risks to the economy from US tariff uncertainty. Tuesday's monetary policy decision is unlikely to provide any significant impulse to the Australian Dollar.

Source: Fxstreet