RBA Preview: Is the Long-Awaited 25bp Cut About to Drop?

As the Reserve Bank of Australia heads into its August policy meeting, scheduled for August 12, 2025 market focus is zeroing in on whether the data finally clears the bar for the long-awaited rate cut.

Key Takeaways:

• What did the RBA signal at the July meeting?
• What has the data shown since then?
• What are the key watchpoints for the August decision?
• How has the AUD responded recently?

What Did the RBA Signal at the July Meeting?

In July, the RBA surprised markets by holding the cash rate steady—despite a 98% chance of a cut priced in beforehand. Governor Michele Bullock emphasised that the pause wasn’t a pivot but “a pause with purpose,” noting the Board is “not ruling anything in or out” and making it clear the bar for any move—up or down—is now materially higher.

What has the data shown since then?

The economic data released since the July meeting has nudged the RBA closer to action.

The June quarter CPI delivered the clearest case yet for a cut. Trimmed mean inflation—a core measure closely watched by the RBA—eased to 2.7% year-on-year, down from 2.9% in March. That puts underlying inflation comfortably back within the RBA’s 2–3% target band for the first time in over three years. Importantly, services inflation—historically the most persistent driver of inflation—has continued to moderate across most categories.

On the employment front—the RBA’s other key mandate—early signs of softening are beginning to emerge. While the labour market still looks solid at a headline level, the unemployment rate edged up to 4.3% in June, the highest since Nov 2021. It’s not a red flag yet, but it adds to a broader picture of cooling, with job vacancies and hours worked also slipping.

In short, the inflation risk has clearly stepped down, while labour market data is flashing yellow. With global uncertainty also rising, the RBA now has the macro cover it needs to consider a move.

What are the key watchpoints for the August RBA decision?

Likely Move: 25 bps Cut

Markets are now cautiously leaning toward a 25 basis point cut, with odds priced at 51% a week ahead of the meeting. The rate curve also reflects rising expectations of further easing—potentially lowering the cash rate to 3.25% by year-end and to 3% by mid-2026.

Statement on Monetary Policy (SMP)

Also landing on decision day is the RBA’s Statement on Monetary Policy—a key document that provides forward guidance. Markets will dissect this for updated inflation forecasts, growth assumptions, and any new language around downside risks. The August SMP will likely shape expectations not just for this meeting, but for the next few quarters.

AUD/USD Outlook

The Australian dollar has been on the defensive, largely due to a resurgent greenback fuelled by the Fed’s hawkish tone. However, the tide may be turning soon.

Recent soft US inflation data, combined with growing speculation that Trump’s pick for Fed chair will be pro rate-cut, has injected fresh volatility into the USD outlook. If the Fed turns more dovish and global yields compress, the AUD could start clawing back ground.

There’s also a wildcard in play: U.S. tariffs. Any escalation—particularly with China—could ripple through commodity markets, hitting demand and weakening the Aussie. On the flip side, a truce or delayed action could provide support.

AUD/USD Technical Highlights

• The pair continues to trade within a short-term ascending channel (black lines), but is struggling to break the upper range near 0.6560–0.6620.
• The weekly close above 0.6500 keeps the bullish structure intact, but any sustained failure at resistance could trigger a pullback.
• Fib retracement from 0.5989 to 0.6911 defines key zones:0.6559 (78.6%) and 0.6623 (upper resistance) mark the next upside hurdles.0.6450 (50%) and 0.6341 (38.2%) serve as layered supports on the downside.
• The 20- and 50-week EMAs (0.6525 & 0.6457) are converging, creating a short-term pivot zone.
• Momentum (KDJ): The KDJ oscillator shows a mild bearish divergence —This suggests fading momentum and reinforces the need for a clean breakout above 0.6620 to reignite upside momentum.

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