AUD/USD extends the rally to near 0.6450 amid weaker US Dollar, tariff uncertainty

• AUD/USD edges higher to near 0.6445 in Monday’s early Asian session. 

• China's manufacturing sector continued to show signs of improvement in May.

• Traders await the US May ISM Manufacturing PMI, which will be released later on Monday. 

The AUD/USD pair extends its upside to around 0.6445 during the early Asian session on Monday. Tariff uncertainty continues to undermine the US Dollar (USD) against the Australian Dollar (AUD). Traders will take more cues from the release of the US May ISM Manufacturing Purchasing Managers' Index (PMI), which is due later on Monday. 

Data released by the National Bureau of Statistics on Saturday showed that the nation’s Manufacturing PMI rose to 49.5 in May, compared to 49.0 in the previous reading. The reading came in line with the market consensus in the reported month. Meanwhile, the Non-Manufacturing PMI declined to 50.3 in May versus April’s 50.4 figure. This figure was below the 50.6 expected. The Aussie remains firm in an immediate reaction to the mixed Chinese PMI data. 

The concern that tariffs will slow growth and reignite inflation in the United States (US) is likely to weigh on the Greenback in the near term. “We're going to have some tariffing. Maybe not as exciting as was announced on April the 2nd, but we're still going to get it,” said Steve Englander, head of global G10 FX research and North America macro strategy at Standard Chartered Bank NY Branch.

Furthermore, the passage of US President Donald Trump’s “Big Beautiful Bill, which is expected to add trillions of USD to an already high fiscal deficit, prompted traders to lean on assets outside the US in the so-called “Sell America” trade. The US May ISM Manufacturing PMI will be the highlight on Monday. If the report showed a stronger-than-expected outcome, this could help limit the USD’s losses and create a headwind for the pair.