What are the RBA rate cut odds implying after the policy decision today?

The aussie is lower as the RBA makes an implicit pivot on policy with their statement today. They were outright to steer clear of mentioning rate cuts but this is a similar step to what we have seen from the Fed and ECB previously in slowly guiding markets towards that step eventually. Instead of previously mentioning rate hikes, the RBA now says that it “cannot rule anything in or out”.

So, how have the rates market reacted to that?

The odds of a rate cut have increased as a result. The first rate cut is now priced in for September this year. However, traders have also stepped up odds of a move in August. That is now seen at ~74% as compared to ~58% previously. Meanwhile, the total rate cuts priced in for the year was seen at ~35 bps before the RBA today. That is now seen at ~42 bps currently.

In the case of the RBA, it seems that traders are conforming back to the pricing in January here. And that better explains the drop in the aussie that we’re seeing so far today, with AUD/USD now looking towards a test of the 0.6500 mark.

This article was written by Justin Low at www.forexlive.com.