The Australian dollar weakened to around $0.656 on Tuesday, after touching over seven-month highs in the previous session, as mounting expectations of a rate cut at the Reserve Bank of Australia's July 2025 meeting weighed on the currency. Markets are now pricing in a 95% probability that the central bank will lower the cash rate by 25 bps to 3.60%, even if Wednesday’s retail sales data exceed expectations. Further bolstering the case for monetary easing is the continued underperformance in consumer spending, which has consistently fallen short of the RBA’s projections. As a result, markets are increasingly forecasting additional rate cuts in the second half of the year, potentially bringing the cash rate down to 3.10% by year-end - and possibly as low as 2.85%, a level widely viewed as stimulative. On the economic front, the manufacturing PMI fell to a four-month low in June, reflecting weakening production and new orders amid subdued export demand and ongoing supply chain disruptions.