AUD/USD Rallies Toward 0.6500 as US Dollar Buckles Under Trade and Debt Pressure

Aussie Strengthens on Manufacturing Support and USD Weakness

The Australian Dollar (AUD) is outperforming on Monday, supported by firm domestic manufacturing data and a sharply weakening US Dollar (USD). The AUD/USD pair has risen to just shy of the 0.6500 handle, a level not seen in several weeks.

US Dollar Slumps on Tariff Hikes and Fiscal Alarm Bells

The USD is under broad selling pressure as markets digest President Donald Trump's announcement to double tariffs on steel and aluminum imports from 25% to 50%. This move has reignited stagflation concerns, as higher input costs could simultaneously slow growth and boost inflation.

Rising Risk Sentiment, China Tensions Add to USD Headwinds

Adding fuel to the fire, Trump has once again escalated tensions with China, claiming that Beijing failed to honor recent trade commitments. Combined with fears over the long-term effects of tax cuts on US fiscal stability, the outlook for the Greenback has turned notably bearish.

Market Focus Turns to ISM PMI and Powell's Speech

Investors now await the US ISM Manufacturing PMI and a speech from Fed Chair Jerome Powell. These could provide crucial signals regarding the Fed's policy direction amid rising market volatility and weakening economic sentiment.