Despite what market pricing suggests, it's very much a toss-up if the RBA decides to cut its cash rate today

RBN 02-07

Expectation is for the central bank to cut its cash rate by 25 bps from 1.25% to 1.00% following its June meeting. Over the past month, we've seen RBA members hint at further cuts still to come but governor Philip Lowe has been a tad bit coy as of late about the whole situation as we approach the meeting today.

Recent developments have also certainly helped the RBA with US and China reaching a trade truce - though no deal is in the offing still - and the Fed looking like it's about to proceed with just an "insurance cut" as opposed to starting an easing cycle.

That could be reason enough for the RBA to stand pat and wait until August instead.

However, if you look at the bigger picture, the RBA was already behind the curve when it cut its cash rate in June so perhaps another cut today is warranted and will have a more profound impact towards the real economy - despite the anticipation.

Regardless, in my view, the risks are tilted to the upside for the aussie as we await the decision. A rate cut has already been ~82% priced in so I reckon there isn't much scope for the aussie to drastically fall unless the RBA sends out a dovish signal by committing to further cuts down the road (next one likely to only be in November).

Meanwhile, should the RBA hold its cash rate steady instead, there's room for the aussie to gain amid some repricing of expectations towards the central bank's upcoming meetings and also through the unwinding of earlier bets.