The AUD/USD pair rebounds strongly from the key support of 0.6650 in Tuesday’s European session. The Aussie pair discovers strong buying interest on expectations that the Reserve Bank of Australia (RBA) will continue with a restrictive monetary policy stance for the remainder of the year.

On Monday, RBA Deputy Governor Andrew Hauser cited the strong employment data as a surprise for him. On the monetary policy outlook, RBA Hauser didn’t provide a clear direction and said, “The central bank is ready to respond in either direction depending on incoming data.” The comment from Hauser left doors open for further interest rate hikes.

Meanwhile, a larger-than-expected interest rate cut by the People’s Bank of China (PBoC) has also improved Australia’s economic outlook, given that the nation is the largest trading partner of China. The PBoC reduced its one-year and five-year Loan Prime Rate (LPR) by 25 basis points (bps), while economists were anticipating a 20-bps rate cut.

However, the near-term appeal of the Australian Dollar (AUD) could be hurt by risk-off market sentiment due to uncertainty over the United States (US) presidential elections that are around the corner. S&P 500 futures have posted significant losses in the European session, exhibiting a sharp decline in investors’ risk appetite.

The US Dollar (USD) holds onto gains near a fresh 11-month high as investors expect the Federal Reserve (Fed) to cut interest rates gradually in November and December. The Fed can afford to avoid a sizeable interest rate cut in November, as expected earlier, after a slew of upbeat US economic data for September that diminished economic slowdown risks.

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