Australian Dollar gains against US Dollar amid US-China trade hopes, RBA outlook

• The Australian Dollar advances against the US Dollar as trade tensions between Washington and Beijing ease.
• Comments from US Treasury Secretary Scott Bessent and Chinese Premier He Lifeng boost hopes of an agreement.
• Markets await Australia's Q3 Consumer Price Index and the Federal Reserve's policy decision.

AUD/USD strengthens on Monday, up 0.67% to around 0.6550 at the time of writing. The Aussie benefits from renewed investor appetite for growth-linked currencies, fueled by signs of progress in US-China trade relations.

Optimism increased after US Treasury Secretary Scott Bessent stated that Washington would not move forward with the recently announced 100% additional tariffs on Chinese imports, while Beijing would suspend its export restrictions on rare earth materials. These remarks, made after Bessent's meeting with Chinese Premier He Lifeng on the sidelines of the Association of Southeast Asian Nations (ASEAN) summit in Malaysia, revived hopes of a lasting trade agreement between the two major economies.

This scenario is particularly favorable for the Australian economy, which relies heavily on exports to China. The easing of trade frictions between Washington and Beijing thus supports demand for the Australian Dollar (AUD).

On the domestic front, investors await the release of Australia's third-quarter Consumer Price Index (CPI) data on Wednesday. The inflation figures will be key in shaping market expectations for the Reserve Bank of Australia's (RBA) monetary policy outlook. During a speech on Monday, RBA Governor Michelle Bullock said the central bank remained committed to "bringing inflation down while keeping employment very satisfying," adding that she expected the job market to improve as soon as next month.

Meanwhile, the US Dollar (USD) remains under pressure as markets increasingly price in an interest rate cut by the Federal Reserve (Fed) at Wednesday's policy meeting, followed by another rate cut in December, as softer US inflation data for September have strengthened expectations of monetary easing.

According to Brown Brothers Harriman, "the Australian Dollar leads the G10 pack on improving US-China trade prospects and RBA Governor Bullock's hawkish tone," noting that markets have trimmed the chance of an RBA interest rate cut in November to 25%.