AUD/USD climbs toward 0.6600 amid ongoing Trump-Xi meeting

• AUD/USD gains due to optimism over the potential for a US-China trade deal.
• Presidents Trump and Xi are set to discuss tariffs, rare earths, soybean trade, fentanyl, and the TikTok deal.
• Fed Chair Jerome Powell noted that another rate cut in December is uncertain.

AUD/USD gains ground after recovering its recent losses registered in the previous session, trading around 0.6590 during the Asian hours on Thursday. The pair appreciates as the Australian Dollar (AUD) receives support from improved market sentiment, fueled by optimism over the potential for a trade deal between the United States (US) and China. Any shift in China's economic conditions could also affect the AUD, given the close trade ties between China and Australia.

At the time of writing, the meeting between US President Donald Trump and Chinese President Xi Jinping is going on at a South Korean airbase near Gimhae International Airport in Busan. Both leaders are expected to discuss a wide range of issues, from fentanyl tariffs to rare-earth to soybean trade to the TikTok deal.

The AUD gained support after Australia's hotter-than-expected Q3 inflation and August CPI data were released on Wednesday. The stronger readings reduced expectations for near-term rate cuts by the Reserve Bank of Australia (RBA). RBA Governor Bullock noted that the labor market remains somewhat tight, despite the unexpected rise in the unemployment rate.

The Federal Reserve (Fed) delivered a widely anticipated 25-basis-point interest rate cut on Wednesday. Policymakers made a mental note of a general increase in some inflationary pressures through the second half of the year, but not enough to deter another leg down in interest rates. However, Fed Chair Jerome Powell stated at the post-meeting press conference that another rate cut in December is far from certain, emphasizing that the path forward remains uncertain.