AUD/USD tumbles to near 0.6480 despite breakthrough in US-Australia bilateral trade

• AUD/USD slumps to near 0.6480 as the US Dollar outperforms despite firm Fed dovish bets.
• The US and Australia signed a trade deal on critical minerals.
• The Fed is almost certain to cut interest rates in the monetary policy announcement next week.

The AUD/USD pair is down over 0.5% to near 0.6480 during the European trading session on Tuesday. The Aussie pair faces intense selling pressure as the Australian Dollar (AUD) underperforms a majority of its peers despite a breakthrough in bilateral trade between the United States (US) and Australia.

Earlier in the day, the US and Australian governments signed a trade agreement on critical minerals, which both called a major step towards strengthening ties.

The US-Australia deal on critical minerals is also seen as an attempt by Washington to avoid dependency on China for rare earth minerals.

Trade relations between the US and China have been going through a rough phase since the imposition of export controls by Beijing on rare earths. In response, Washington also increased tariffs on imports from the dragon economy by 100%.

However, trade frictions between the world's largest powerhouses are expected to have diminished lately as US President Donald Trump stated on Friday that higher tariffs on Beijing won't last long.

Meanwhile, the US Dollar (USD) extends its upside despite the Federal Reserve (Fed) being largely expected to cut interest rates in its upcoming policy meeting next week. During the press time, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, jumps to near 99.00.

According to the CME FedWatch tool, traders have almost priced in a 25-basis-point (bps) reduction in the Federal Fund Rate that will push them lower to 3.75%-4.00%. This will be the second interest rate cut by the Fed in a row.

This week, investors will focus on the delayed US Consumer Price Index (CPI) data for September, which will be released on Friday.