The AUD/USD decreases while the market prepares for a reduction of types by RBA in the midst of growing commercial tensions

• The Australian dollar extends losses for the third consecutive day, pressured by betting bets of interest rates and risk aversion flows.
• The AUD/USD falls below 0.6550, around the level of 0.6500 during negotiation hours in America.
• It is widely expected that the RBA cut the official cash rate at 25 basic points on Tuesday, marking its third rate reduction in 2025.

The Australian dollar (AUD) weakens even more against the US dollar (USD) on Monday, marking its third consecutive daily fall, since investors feel more and more safe that the Bank of the Australian Reserve (RBA) will make another rate cut at the meeting on Tuesday. Adding downward pressure on aussie, the increase in commercial tensions before the deadline of US tariffs of July 9 is further decreasing the appetite for risk, feeding the demand for the dollar as a safe refuge.

The aud/USD torque slides below 0.6550, around the level of 0.6500 during negotiation hours in America, moving away from the maximum of eight months reached last week. The torque has dropped around 0.85% in the day, since operators adopt a defensive position before the RBA policy announcement.

Meanwhile, the US dollar index (DXY), which follows the performance of the dollar against a basket of six main currencies, is being negotiated about 97.30, registering a slight rebound. The US dollar is receiving support from renewed flows to safe shelters and reduced expectations of an interest rate cut by the Fed in the short term.

It is widely expected that the RBA performs a cut of 25 basic points (PB) on Tuesday, carrying the official cash (OCR) rate of 3.85% to 3.60%. This would mark the third reduction in 2025, since the Central Bank continues to respond to a weakened economic background. Currently, markets allocate more than 90% probability to the July movement, with forecasts that now extend towards greater reduction in August, perhaps even in November.

Most of the main Australian banks, including Westpac, Commonwealth Bank and NAB, have aligned with the market consensus, predicting a 25 -PB cut in July. The chief economist of Westpac, Luci Ellis, a former RBA figure, has changed her opinion to favor a cut in July, considering it the most prudent response since the recent data from the consumer price index (CPI) have been softer than anticipated. Commonwealth Bank coincides with this, predicting two cuts in July and August, based on the decrease in inflation and a moderate tone of the central bank.

The trajectory of RBA rates cuts is mainly driven by a domestic economy that is weakening and a continuous decrease in inflationary pressures. Key economic indicators indicate a weakening of the impulse, with the consumption of households, keeping moderate, retail sales exhibiting only marginal growth and business confidence in Declive. The growth has slowed markedly in recent months, with the Gross Domestic Product (GDP) of the first quarter expanding only 0.2%, while annualized inflation has cooled to 2.1%, towards the lower end of the target range of 2%–3%of the RBA.

The operators will also closely follow the RBA monetary policy statement in search of clues on the future path of interest rates. While it is expected and a 25 PB cut, any sign of additional relief in the coming months could exert more pressure on the Australian dollar. A moderate tone of the Central Bank would probably keep the AUD/USD under pressure, especially amid the ongoing commercial tensions.