The Australian dollar strengthened to around $0.648 on Wednesday, extending gains from the previous session, as growing bets on a US Federal Reserve rate cut in September lifted risk sentiment. Markets are now pricing in a 90% chance of easing amid signs of a weakening US economy. On the trade front, President Trump threatened to impose steep tariffs on pharmaceutical imports and semiconductors. However, he signaled a possible trade truce extension with China ahead of the August deadline, saying a deal is “very close”. Meanwhile, with little data due this week, the Aussie may struggle as markets fully price in a quarter-point RBA rate cut to 3.60% on August 12. However, with the central bank signaling a cautious approach to easing, investors largely expect a pause in September, with any further cut likely hinging on continued disinflation. Attention will turn to the Q3 CPI due October 29 and monthly jobs data for signs of a sustained rise in unemployment.