Australian cash rate futures see about a 10% chance of the RBA cutting rates

WIRP AU 29-01

The above odds reflect the drop from ~24% yesterday and comes after the Australian Q4 CPI data earlier showed slightly better-than-expected readings.

But with the market already so heavily pricing out a rate cut for 4 February, it is hard to imagine the aussie seeing much upside from rates movement from hereon.

I mean the inflation data was decent, in the sense that it did not reflect a significant falloff. Actually, scratch that. It should just be viewed as being 'okay'.

I mean the RBA's preferred measure of inflation i.e. trimmed mean reading came in at 1.6% y/y and continues to fall short of the central bank's target band of 2-3%.

So, while rate cut expectations have been pared back, does that mean the RBA is going to be less dovish when staying on hold next week? Most definitely not.

Given that particular bias, it is hard to imagine significant upside for the aussie against the likes of the dollar and kiwi. But any push to the downside requires some catalyst and we may have to look beyond the RBA meeting next week for that to come about.

In any decent aussie rally on risk, I reckon fading the move is still the way to go as the path of least resistance for the currency remains to the downside at this stage.