• Australian Dollar loses ground on risk aversion as traders await Israel’s response to Iran’s attack.
• Australian currency faces challenges due to differing monetary policy outlooks between the RBA and the Fed.
• US Dollar receives support as stronger-than-expected US Retail Sales figures have diminished sentiment regarding the Fed’s rate cuts.

The Australian Dollar (AUD) extends losses for the third consecutive session on Tuesday, possibly due to the risk aversion as investors cautiously await Israel’s response to Iran’s unprecedented air assault on Saturday. However, the AUD/USD pair pares losses after mixed data from China.

The Australian Dollar faces hurdles amid concerns that the Reserve Bank of Australia (RBA) might need to lower interest rates ahead of the United States (US). According to the Financial Review, the ongoing high inflation in the world's largest economy raises uncertainty about whether the Federal Reserve can take any action this year. Traditionally, as the world's most influential central bank due to the scale of the financial markets it oversees, the Fed typically leads global rate-cutting cycles.

The US Dollar Index (DXY) remains on an upward trajectory, likely influenced by the rise in US Treasury yields. The stronger-than-anticipated US Retail Sales data has added to the diminishing sentiment regarding the Federal Reserve's (Fed) potential monetary policy easing, thereby bolstering the US Dollar (USD). Investors are likely to monitor the US housing data slated for release on Tuesday, alongside Fed Chair Jerome Powell's speech at the Washington Forum.