Australian inflation declined more than expected in the fourth quarter, and the RBA’s pushback against rate cut bets was also challenged by soft employment figures for January. That said, we do not doubt the determination of the RBA to keep rates higher for some time. Our expectations remain that monetary easing in Australia will only be a story for the second half of the year and be worth a total of 50 bps – significantly less than the Fed and RBNZ.

AUD is in a good position to rally once US data allows rate cut bets to rebound in the US, even though potential defensive positioning ahead of US elections in the third quarter (a Trump re-election would hit China-related sentiment) means AUD/USD could struggle to trade consistently above 0.7000.