The Australian Dollar (AUD) continues to weaken against the US Dollar (USD) on Tuesday, driven by dampened market sentiment following President-elect Donald Trump's announcement of a 10% increase in tariffs on all Chinese goods entering the United States (US), along with a 25% tariff on imports from Mexico and Canada.

The downside for the AUD/USD pair may be limited, as the Australian Dollar could find support from the Reserve Bank of Australia's (RBA) hawkish outlook on future interest rate decisions.

Traders are now turning their attention to Australia's Monthly Consumer Price Index (CPI) for October due on Wednesday, a key indicator that could influence expectations regarding domestic monetary policy.

The RBA's November Meeting Minutes indicated that the board remains cautious about the risk of further inflationary pressures, underscoring the need to maintain a restrictive monetary policy stance.

While the board noted there was no "immediate need" to adjust the cash rate, it stressed the importance of keeping all options open for future policy changes, highlighting a flexible and data-driven approach.

Source: FXSTreet