AUD/USD returns above 0.6500 amid broad-based USD weakness

• The Aussie Dollar retraced previous losses and reached weekly highs past 0.6500.
• Weak US data and tariff uncertainty keep US Dollar rallies limited.
• Investors are overlooking the Soft Australian GDP and the dovish RBA stance.

The Australian Dollar is trading higher for the second consecutive day on Thursday as US Dollar weakness offsets the impact of the downbeat Australian GDP figures seen on Wednesday, pushing the pair to one-week highs above 0.6500.

The US Dollar weakness is the main driver of an otherwise calm market on Thursday. The Greenback was hit on Wednesday by an unexpected contraction of US Services activity, as reported by the ISM PMI index, and a lower-than expected increase on ADP payrolls, which cast doubts on Friday's Nonfarm Payrolls report and revived fears of a recession in the US.

Beyond that, the tariffs turmoil has returned to the forefront, as Trump deemed trade negotiations with Chinese Premier Xi as "extremely hard" amid a lack of progress in deals with any other country, on the day that levies in Steel and Aluminium increased to 50% from the previous 25% level.

The AUD is weathering global trade uncertainty for now

The uncertain trade scenario, curiously, is hurting the US Dollar, rather than the traditionally risk-sensitive Aussie so far. The soft macroeconomic data seen in the US this week, coupled with trade restrictions that would hamper economic growth further, and the rising concerns about the ballooning US debt, are driving traders away from US assets, looking for alternative assets.

These figures have offset the impact of a poor Australian GDP, which grew at a 0.2% pace in Q1, disappointing expectations of a 0.4% rise and highlighting a significant slowdown from the previous quarter's 0.6% growth.

Apart from that, the minutes of the Reserve Bank of Australia's latest meeting revealed that the bank considered a 0.5% rate cut, and that they are ready to deliver rapid-fire rate cuts if Trump's tariffs hurt economic growth. This stance might limit the Australian Dollar's rallies.