The AUD/USD pair fell sharply to around 0.6480 during Tuesday’s European session, dropping over 0.5% despite a major breakthrough in trade relations between the United States and Australia. The Australian Dollar remains under pressure, lagging behind most of its peers, as the US Dollar strengthens across the board.
🔹 US-Australia Sign Critical Minerals Trade Deal
Earlier today, the US and Australia signed a significant bilateral trade agreement focused on critical minerals, marking a step forward in reducing dependency on China’s rare earth exports.
The deal aims to deepen strategic ties between the two allies and ensure more stable access to key materials essential for manufacturing, defense, and technology.
🔹 Market Ignores Positive News for AUD
Despite the positive geopolitical development, the Australian Dollar failed to gain ground. Several factors appear to be weighing on the AUD:
- The US Dollar Index (DXY) surged near 99.00, reflecting broad-based USD strength.
- The AUD underperformed as risk sentiment remained muted, and demand for safe-haven assets stayed firm.
Interestingly, the market seems to be shrugging off dovish Federal Reserve expectations, which would typically weigh on the USD and support high-yielding currencies like the AUD.
🔹 Fed Rate Cut Expected Next Week
According to the CME FedWatch Tool, traders have nearly priced in a 25 basis point rate cut at the Federal Reserve’s upcoming policy meeting, which would lower the Federal Funds Rate to 3.75%–4.00%. This would be the second consecutive cut, suggesting the Fed is leaning more dovish due to softening inflation.
Still, the USD remains resilient — a sign that investors are favoring the Greenback, possibly as a safer bet amid global uncertainty.
🔹 Currency Performance Snapshot
The following heatmap shows how the USD is performing against other major currencies today:
| Base \ Quote | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|
| USD | +0.15% | +0.14% | +0.76% | +0.08% | +0.34% | +0.41% | +0.22% |
👉 The US Dollar was strongest against the Japanese Yen (+0.76%) and also gained notably against the Australian Dollar (+0.34%).
🔹 What’s Next for the AUD?
Key drivers to watch:
- Upcoming US CPI data for September (due Friday), which may impact the Fed’s policy outlook.
- Iron Ore prices, as Australia’s top export plays a crucial role in AUD strength.
- The health of the Chinese economy, given China is Australia’s largest trading partner.
- The Reserve Bank of Australia’s (RBA) policy stance, especially if it diverges from the Fed.
🧠 Why the AUD Is Struggling Despite Positive News
The Australian Dollar often moves based on global risk sentiment, commodity prices, and Chinese demand. So while the trade deal is positive in the long term, immediate market focus remains on:
- The Fed’s upcoming decision
- The strength of the US economy
- Ongoing US-China trade tensions, despite signs of easing
Until clearer risk-on signals emerge, the AUD could remain under pressure, especially against a strong USD.
