The Reserve Bank of Australia cut rates for the first time in four years this morning, matching consensus and market expectations. The 25bp reduction was accompanied by some rather hawkish remarks by Governor Michele Bullock, both in the statement and in the press conference, ING’s FX analysts Francesco Pesole notes.

AUD/USD to return to 0.62 by the end of March

"Bullock seemed to focus on pushing back against the dovish repricing in the AUD curve, reiterating that the focus remains firmly on inflation risk. That approach is in contrast with those of other developed central banks which have shifted towards growth concerns."

"Markets are pricing just under two cuts in Australia by the end of 2025, while we have a slightly more dovish forecast with one cut per quarter. Bullock’s cautious tone on further easing has allowed AUD to counter the USD rebound this morning. That said, we doubt markets are ready to shift expectations to only one RBA cut this year, and AUD’s high exposure to the trade story and risk sentiment may quickly overcome any short-term benefits from the RBA’s tone today."

"We still think a return to 0.62 in AUD/USD is warranted by the end of March, with further downside risks in the second and third quarters when US protectionism may intensify."