AUD/USD Softens, ASX Hits Record as RBA Cuts and Lowers Cash Rate Projection

The Reserve Bank of Australia (RBA) cut the cash rate by 25bp to 3.6%, marking the third reduction of this cycle. The Bank also left the door open for further easing by lowering its cash rate outlook by 30bp by the end of 2026. The statement noted that the cash rate is expected to “follow a gradual easing path” alongside inflation and that “further easing was appropriate” today given the softening labour market.

Updated forecasts in the RBA’s Statement of Monetary Policy (SOMP) showed weaker growth, higher unemployment, and a downgrade to headline inflation. The trimmed mean CPI forecast remained at 2.6% as anticipated earlier this week, but perhaps the most notable change was the projected terminal rate — now seen at 2.9% by December 2026, down from 3.2% in May’s SOMP.

With the cash rate now estimated at 3.1% by June 2026 and 2.9% by December, the RBA has ample scope to stagger 25bp cuts through Q4 this year and into 2026.

 

 

RBA Statement of Monetary Policy: Key Takeaways

• Inflation has fallen substantially since its 2022 peak
• Underlying inflation expected to moderate toward the midpoint of the 2–3% range
• Cash rate assumed to follow a gradual easing path
• Outlook risks stem from both domestic and international developments
• The Board remains cautious on the economic outlook
• Monetary policy positioned to respond decisively to significant international developments
• The Board will closely monitor incoming data and evolving risks

 

 

RBA Likely to Cut Once More in 2025

Three policy meetings remain in 2025 — September, November, and December. With the year-end cash rate forecast at 3.4%, markets are pricing roughly an 80% probability of one additional 25bp cut. Unless tomorrow’s employment figures show a sharp deterioration, a further cut is more likely in November or December than September. The RBA rarely delivers back-to-back cuts while still pushing a cautious narrative, and its statement underscored readiness to respond to international developments — including potential hikes — if necessary.

 

Australian Dollar Softens Post-RBA Cut, ASX 200 Hits Record High

The Australian dollar is trading broadly lower against its major FX peers, although the declines are modest given the RBA’s 25bp cut was widely expected and its easing path appears less aggressive than some bearish traders had anticipated.

• AUD/USD is down around 0.2% and trading below 0.65.

• AUD/CAD is forming a potential bearish engulfing day.

• AUD/NZD continues to stall near 1.0980.

• AUD/JPY is showing signs of a potential swing high.

• GBP/AUD has broken to a fresh three-week high, appealing to bulls.

• ASX 200 has reached a new record high, supported by the prospect of RBA easing without a domestic recession.

 

Chart analysis by Matt Simpson - data source: TradingView

 

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge