The Australian Dollar (AUD) traded with caution against major currency peers, declining 0.23% to near 0.7230 against the US Dollar (USD) during the late Asian trading session on Tuesday, as markets awaited the Australian Budget release for 2026 scheduled at 09:30 GMT [1]. According to a currency heat map, the AUD was the weakest against the USD, falling 0.28% on the day, and also posted declines against other major currencies such as the EUR, GBP, and CAD [1].
Treasurer Jim Chalmers acknowledged ongoing issues in the housing and tax systems, stating, “I think the housing market and the tax system are not working for a lot of Australians, and tonight we seek to address that,” as reported by The Guardian [1]. This statement highlights the government's intent to tackle these challenges in the upcoming budget [1].
Geopolitical tensions also weighed on the AUD, with renewed concerns over US-Iran relations. CNN reported that US President Donald Trump has grown increasingly frustrated with Iran's approach to conflict resolution, and some aides suggest he is now more seriously considering a resumption of major combat operations than in recent weeks [1]. This has contributed to a risk-off market mood, reflected in a 0.2% decline in S&P 500 futures and a 0.25% rise in the US Dollar Index (DXY) to near 98.15 [1].
Looking ahead, investors are closely monitoring the upcoming meeting between US President Trump and Chinese leader Xi Jinping, scheduled for May 13-15 in China. The outcome of this bilateral meeting is expected to have a significant impact on the Australian Dollar, given the currency's sensitivity to global risk sentiment and trade developments [1].
CONCLUSION
The Australian Dollar faced downward pressure ahead of the 2026 Budget release, driven by domestic policy uncertainty and heightened geopolitical risks. Market participants are expected to remain cautious, with attention focused on both the budget outcomes and the upcoming US-China summit, both of which could further influence AUD volatility.