The Australian dollar/US dollar (AUD/USD) remained subdued on Tuesday for the second consecutive day. However, AUD/USD remained around the psychological level of 0.6500 after retreating to a six-month high of 0.6537 reached on Monday. However, the continued decline in the United States dollar provided support to the pair, which can be attributed to the growing concerns over the United States (US) debt problem.

China's industrial profits rose 3% in April from a year earlier, after rising 2.6% previously. Furthermore, profits for the first four months of 2025 rose 1.4% year-on-year, an improvement from the 0.8% growth in the January-March period. Chinese state media outlet Global Times said the positive developments boosted industrial profits in April. The media also pointed out that the rapid growth of profits in emerging driving industries such as equipment and high-tech manufacturing highlighted the resilience of the industry. Any changes in the Chinese economy could affect the Australian dollar as Australia has close trading relations with China.

AUD/USD is likely to regain its ground as the US dollar may face additional challenges and risk appetite sentiment improves, driven by easing US-China trade tensions. U.S. President Donald Trump extended the tariff deadline on the European Union from June 1 to July 9 following a call with European Commission President Ursula von der Leyen on Sunday. On Friday, Trump threatened to impose a 50% tariff on imports from the European Union.

The Reserve Bank of Australia (RBA) is expected to cut interest rates further at its upcoming policy meeting, which may limit the upside for the Australian dollar. The Reserve Bank of Australia cut interest rates by 25 basis points last week. In addition, President Michel Bullock said the central bank was ready to take further action if the economic outlook deteriorated sharply, increasing the likelihood of future rate cuts.