• AUD/USD edges higher around 0.6550, lifted by improved market sentiment.
• Expectations of further Fed rate cuts keep the US Dollar under pressure.
• Traders await Australia’s Q3 Gross Domestic Product release.

AUD/USD trades around 0.6550 on Tuesday at the time of writing, up 0.20% on the day. The pair benefits from a slightly stronger risk tone and a US Dollar (USD) weakened by rising expectations of additional monetary easing from the Federal Reserve (Fed).

Support for the Australian Dollar (AUD) also stems from the cautious but still hawkish stance of the Reserve Bank of Australia (RBA), which limits speculation about further policy easing. Meanwhile, the persistent softness of the US Dollar (USD) reflects a string of weaker US economic indicators, particularly in the manufacturing sector, which reinforces expectations of a December Fed rate cut.

In Australia, market attention remains focused on the Services Purchasing Managers Index (PMI) scheduled for later in the day, ahead of third-quarter Gross Domestic Product (GDP) data, due on Wednesday. Consensus forecasts point to solid quarterly growth, which could further support the Aussie if the outcome surprises to the upside. However, concerns about softer Chinese data, given China’s role as Australia’s main trading partner, may limit AUD upside potential.

Overall, market dynamics remain driven by shifts in risk sentiment and evolving expectations surrounding the Fed’s policy path. If markets maintain their view of further easing ahead, the USD may continue to retreat, offering additional short-term support for AUD/USD.