The RBA announcement does carry some downside risks to the Australian Dollar, as the unexpected flattening in January’s CPI at 3.4% might prompt policymakers to open the discussion on rate cuts. We are not convinced that this will happen, though.

The RBA still has reasons to maintain its hawkish bias, given a lower policy rate compared to other major central banks, the recent hawkish repricing in global rate expectations, and the lingering risks of a rebound in inflation. 

We like the chances of a sustained AUD rally from the second quarter and are not too worried that the RBA will get in the way.