AUD/USD slumps to near 0.6450 as progress in US-EU trade talks lifts US Dollar

• AUD/USD retraces to near 0.6450 amid optimism that the EU and the US will reach a trade deal.
• US President Trump suspended 50% tariffs on imports from the EU until July 9.
• Investors await the Australian Monthly CPI data for April.

The AUD/USD pair extends correction to near 0.6450 during North American trading hours on Tuesday from its six-month high of 0.6537 posted the previous day. The Aussie pair retraces as the US Dollar (USD) recovers strongly on easing trade tensions between the European Union (EU) and the United States (US).

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to near 99.40 from the monthly low of 98.70 posted on Monday.

Market experts have linked the Greenback’s recovery move to the US President Donald Trump’s decision to suspend 50% tariffs on imports from the Eurozone until July 9, announced over the weekend. "I would guess strength in the US Dollar is because Trump retreated over the weekend. Yesterday, markets were closed, so there was only a small move. Now, with the UK being back, it’s a recovery of the move we saw on Friday," analysts at Commerzbank said.

On the domestic front, US Durable Goods Orders data for April has come in significantly weak. The Census Bureau reported that cost of orders received by manufacturers for durable goods declined by 6.3% after a significant increase of 7.6% in March. Economists expected the data to have declined substantially by 7.9%.

Meanwhile, the Australian Dollar (AUD) underperforms ahead of the Monthly Consumer Price Index (CPI) data for April, which will be released on Wednesday. The CPI data is expected to have grown at a moderate pace of 2.3% on year, compared to 2.4% growth seen in March. Soft inflations data would boost expectations of more interest rate cuts by the Reserve Bank of Australia (RBA) in the remainder of the year.