The Australian dollar rose against most major currencies on Tuesday following a widely expected monetary policy decision.

The Reserve Bank of Australia on Tuesday cut the official cash rate by 25 basis points to 3.60% at its regular meeting, marking the third rate cut this year after reductions in February and May, and following a surprise pause in July that puzzled analysts and frustrated mortgage holders.

The decision was in line with broad market expectations, with futures pricing pointing to nearly a 100% probability of a cut, and all four major banks forecasting at least one more reduction before year-end. A Reuters poll conducted last week showed all 40 surveyed economists expecting a cut this week.

At the press conference following the meeting, Governor Michele Bullock said:

“The outlook suggests the cash rate may need to be a little lower than it is now to keep inflation falling and stable while supporting employment growth, but there remains a good deal of uncertainty. Therefore, the Board will continue to focus on the data to guide its decisions.”

Bullock confirmed the Bank did not discuss a cut larger than 25 basis points. Commonwealth Bank was the first to pass on the reduction to mortgage rates, followed by other banks.

Inflation Falls, Economy Slows

The RBA expressed satisfaction with the sharp decline in inflation, with the “trimmed mean” – its preferred core inflation measure – falling below 3% for the second consecutive quarter, a marked change from 2023 when inflation was well above target.

Headline inflation eased to 2.1%, comfortably within the 2%–3% target range, while the trimmed mean stood at 2.7%. The Bank noted:

“Inflation has declined substantially from its 2022 peak, with higher interest rates helping bring aggregate demand and potential output closer to balance.”

In contrast, data point to a clear slowdown in the economy; GDP grew just 0.2% in Q1 and 1.3% year-on-year, well below the Bank’s earlier forecasts. Unemployment rose to 4.3%, job ads fell, and household spending remained weak with flat retail sales and continued pessimism in consumer sentiment.

In its quarterly monetary policy statement, the Bank lowered its GDP growth forecast for December 2025 to 1.7% from 2.1%, citing weak consumer spending and lower business investment, indicating the need for more cuts to support growth.

Consensus on Early Action

Minutes from the July meeting showed a split decision at the time, with three members supporting a cut and six preferring to wait for more inflation data. Today, however, all nine members voted in favor of the cut, signaling the Bank is now more convinced of the need to act early to provide extra support rather than risk a deeper slowdown later.

More Cuts Expected

The Bank’s statement kept the door open for additional easing, noting the potential for further cuts if inflation remains under control and economic activity weakens.

Markets are betting on another 25-basis-point cut in November, with expectations that the cash rate will fall to around 3.35% by year-end. Major banks foresee continued easing, with NAB projecting 3.10% by February 2026 and Westpac seeing 2.85% by mid-2026, in agreement that today’s move will not be the last in this cycle.

In currency markets, the Australian dollar rose against the US dollar by 0.3% to 0.6531 as of 20:57 GMT.

Canadian Dollar

The Canadian dollar was steady against its US counterpart at 0.7258 as of 20:57 GMT.

US Dollar

The US dollar index fell 0.4% to 98.09 as of 20:24 GMT, after hitting a high of 98.6 and a low of 97.9.

Government data showed that the annual growth rate of the US consumer price index held steady at 2.7% in July, below expectations for a rise to 2.8%.

Core CPI – which excludes volatile food and energy prices – rose to 3.1% in July, above expectations for 3% and compared with 2.9% in June.

According to the FedWatch tool, investors see a 94% probability of a 25-basis-point rate cut in September, compared with 86% yesterday and 57% a month ago.

Analysts also see a 61% chance of another 25-basis-point cut in October, compared with 34% a month ago, plus a 51% probability of a similar cut in December, compared with 25% a month earlier.

The White House confirmed on Monday that Nvidia and AMD have reached an agreement to share 15% of their revenue from sales to China with the US government, a move that has sparked debate over its potential impact on the two chipmaking giants and whether Washington might pursue similar deals with other companies.

Under the agreement, the companies will receive export licenses to sell Nvidia’s H20 chips and AMD’s MI308 chips in China, according to the Financial Times.

In a statement to NBC News, Nvidia said: “We follow the rules set by the US government for our participation in global markets. While we have not shipped the H20 to China for months, we hope export control rules will allow us to compete with China both domestically and globally. America cannot repeat the 5G mistake and lose its leadership in communications. US technology infrastructure in AI can be the global standard if we compete.”

AMD confirmed in a statement that its initial export license applications for MI308 chips to China had been approved.

Analysts speaking to CNBC described these arrangements, set by President Donald Trump’s administration, as “unusual,” but reflective of the current White House’s transactional nature. Investors generally view the step as positive for both companies, as it secures renewed access to the Chinese market.

Impact on Nvidia and AMD

The H20 chip from Nvidia was designed specifically to meet US export requirements for China and was previously banned under export restrictions, but the company announced last month it expected to receive licenses to ship the product to China.

In July, AMD also said it would resume exports of MI308 chips. At that time, there was no indication that resuming sales to China would be conditional or tied to a revenue share, and markets welcomed the move as reopening a multi-billion-dollar sales opportunity.

Despite both companies’ shares closing slightly lower on Monday, Ben Barringer, global technology analyst at Quilter Cheviot, told CNBC: “From an investor’s perspective, the outcome remains positive – getting 85% of the revenue is better than nothing. The question is whether Nvidia and AMD will raise their prices by 15% to offset the levy, but ultimately it’s better to sell in the market than leave it entirely to Huawei,” their closest Chinese competitor.

However, uncertainty remains over their long-term future. George Chen, co-chair of digital practice at The Asia Group, said: “In the short term, the agreement gives both companies some certainty over their exports to China. In the long term, we don’t know whether the US government will seek a larger share of their China business, especially if their sales there continue to grow.”

Analysts told CNBC the deal is “unusual” but consistent with Trump’s style. Barringer said: “It’s a good but strange move, the sort you’d expect from President Trump, who is at heart a dealmaker. He’s willing to compromise – but only if he gets something in return, and that sets an unusual precedent.”

Neil Shah, a partner at Counterpoint Research, described the revenue share as “an indirect tariff at the source.” Daniel Newman, CEO of The Futurum Group, wrote on X that the move resembled “a tax” on doing business in China.

Other analysts believe such deals are unlikely to extend to other companies. Nick Patience, head of AI at The Futurum Group, said: “I don’t expect it to extend to other sectors equally critical to the US economy, such as software and services.”

The US views the semiconductor industry as a strategic technology, forming the backbone of many other tools such as AI, consumer electronics, and even military applications. This is why Washington has placed chips under an export control regime unlike any other product. Chen from The Asia Group said: “The semiconductor industry is unique, and the pay-to-enter approach may work in Nvidia and AMD’s case because it’s essentially about getting US government export approval. For companies like Apple and Meta, the situation is more complicated given the nature of their business models and services in China.”

How Might China Respond?

Semiconductors have become a highly sensitive geopolitical topic. Over the past two weeks, China has expressed concern over the security of Nvidia chips.

Late last month, Chinese regulators asked Nvidia to “clarify” reports of potential security vulnerabilities and “backdoors.” Nvidia denied the existence of any backdoors granting access or control over its chips. More recently, the company again denied backdoors in its H20 chips after allegations from a social media account linked to Chinese state media.

Trump’s deal with Nvidia and AMD is likely to elicit mixed reactions in China – Beijing will be displeased with the arrangement, but Chinese companies will still seek to acquire these chips to advance their AI ambitions. Shah from Counterpoint Research said: “For China, it’s a dilemma – it needs these chips to boost its AI ambitions, but the US revenue levy could make them more expensive, and there are concerns about US backdoors, especially as Washington has approved supplying these chips to Chinese companies.”

US stock indices rose during Tuesday’s trading as markets assessed last month’s inflation data and its impact on the Federal Reserve’s monetary policy.

Government data revealed that the annual growth rate of the US consumer price index held steady at 2.7% in July, below expectations for an increase to 2.8%.

Core inflation – which excludes volatile food and energy prices – rose to 3.1% in July, higher than expectations of a 3% increase, and compared to 2.9% in June.

According to the FedWatch tool, investors now see a 94% probability of a 25-basis-point rate cut in September, compared to 86% yesterday and 57% a month ago.

Analysts also project a 61% probability of another 25-basis-point cut in October, compared to 34% a month ago, along with a 51% probability of a similar cut in December, compared to 25% a month ago.

As for trading, by 16:52 GMT the Dow Jones Industrial Average rose 1% (450 points) to 44,415 points, the broader S&P 500 gained 0.8% (51 points) to 6,424 points, while the Nasdaq Composite climbed 0.9% (198 points) to 21,583 points.

Palladium prices fell on Tuesday as markets closely watched the talks to be held later this week between the Presidents of the United States and Russia.

US President Donald Trump and Russian President Vladimir Putin will meet in direct talks on Friday in the US state of Alaska to discuss ending the war in Ukraine.

UBS this week raised its palladium price forecasts by $100 per ounce across all timeframes, citing expectations of lower output from Canadian mines.

However, the banking group still maintains a bearish outlook on the metal due to weak demand from the automotive sector.

UBS said in a note to clients: “After platinum, palladium is the second-best performing precious metal this year, having risen by 37%.” It added that “concerns about supply disruptions and short covering activity may have contributed to the rise in the metal’s price.”

Bank analysts highlighted a rally driven by short covering in the futures markets, as non-commercial short positions fell from 1.9 million ounces in April to 1.1 million ounces, while long positions rose slightly to more than 0.9 million ounces.

They explained: “Positions remain in a slightly net short position, far from the extreme short level that approached 1.1 million ounces.”

The bank also pointed out that geopolitical risks and supply factors are contributing to increased price volatility, noting that “US President Donald Trump threatened to impose secondary tariffs on buyers of goods coming from Russia,” the world’s largest producer of palladium.

Concerns have also grown about potential tariffs on South Africa, the second-largest producer, according to the bank.

At the same time, analysts noted that Implats Canada announced plans to halt production at the Lac des Iles mine by May 2026, which currently supplies the market with about 0.2–0.25 million ounces annually.

Despite these supply concerns, UBS warned that palladium remains a high-risk asset, saying: “Only investors with a high risk tolerance should consider trading palladium, given its low trading volume and small market size.”

The group expects challenges to persist, noting that “more than 80% of demand for palladium comes from its use in gasoline-powered vehicles,” while US auto production remains under pressure from tariffs.

On the other hand, the US dollar index fell by 0.5% to 98.05 points at 16:35 GMT, after recording a high of 98.6 points and a low of 98.1 points.

In trading, palladium futures for September delivery fell by 1.6% to $1,140.5 per ounce at 16:35 GMT.