• AUD/USD extends its pullback after testing the 0.7100 area.
• Investors await Australia’s CPI to assess the monetary policy path.
• Fresh US tariff threats add to market uncertainty.

AUD/USD trades around 0.7040 at the time of writing on Tuesday, down 0.20% on the day, after failing to hold above the psychological 0.7100 mark on Monday. The pair is correcting from multi-month highs as market participants trim risk exposure ahead of a series of key macroeconomic events in Australia, China, and the United States (US).

The release of Australia’s January Consumer Price Index (CPI) on Wednesday stands as the week’s main catalyst. Headline inflation is expected to rise 3.7% YoY, slightly below the previous 3.8%, while the Trimmed Mean measure is seen steady at 3.3%. These figures will be closely watched following the Reserve Bank of Australia's (RBA) recent 25-basis-point rate hike, which lifted the cash rate to 3.85%. The central bank justified the move by pointing to persistent inflationary pressures and stronger-than-expected private demand, signaling that a restrictive bias remains in place should price pressures fail to ease.

On the US side, the trade backdrop remains a key factor. After the US Supreme Court blocked certain previous tariffs, President Donald Trump threatened to impose a new 15% global tariff under Section 122 of the Trade Act. The announcement revives concerns of renewed trade tensions and weighs on cyclical currencies such as the Australian Dollar (AUD), which is sensitive to global trade dynamics.

As a result, AUD/USD stands at the crossroads of diverging forces. On one hand, the prospect of persistently restrictive Australian monetary policy, and on the other, an international environment marked by trade uncertainty and steady demand for the US Dollar. The upcoming Australian inflation release may determine whether the pair stabilizes above the 0.7000 level or if the pullback from 0.7100 evolves into a more sustained consolidation phase.