• The Australian Dollar appreciates possibly due to improved risk sentiment amid de-escalated tensions in the Middle East.
• The Australian currency could face challenges on the market sentiment of RBA cutting policy rates before the year's end.
• The US Dollar may rebound as comments from Federal Reserve officials suggest a hawkish stance on monetary policy tightening.

The Australian Dollar (AUD) breaks its two-day losing streak on Monday amid risk-on sentiment, supported by indications of de-escalating geopolitical tensions. An Iranian official's statement suggesting no immediate plans for retaliation against Israeli airstrikes contributes to the improved sentiment.

The Australian Dollar may encounter challenges ahead, particularly as domestic inflation continues to moderate, aligning with the Reserve Bank of Australia's (RBA) latest forecasts. Furthermore, the persistently tight labor market could lead to calls for an RBA rate reduction before the year's end.

The US Dollar Index (DXY), which gauges the US Dollar (USD) against six major currencies, faces pressure despite the increase in US Treasury yields. However, the potential downside for the USD pair could be restrained by comments from Federal Reserve (Fed) officials suggesting a move toward a more hawkish stance.