RBA policy meeting is on 20th May which we believe might be a hawkish 25 bps cut. Market is currently pricing in a terminal rate of 3.21 levels by CY26 (current policy rate is 4.10). We believe this is very aggressive pricing. We believe that RBA might cut by 25 bps each in it’s 20th May & 12th Aug meeting and then go on a long pause. For us the terminal rate is 3.6% through CY26. The ~7 bps of cuts still priced in for the July RBA meeting looks particularly vulnerable to us. We also believe that RBA is likely to announce active QT in the 20th May meeting from it’s current passive QT. This should augur well for AUD too. Hence, we remain bullish on AUD because the market is currently pricing in a lower terminal rate than our expectations. Also, AUD looks to be the perfect proxy for both risk on and risk off situations. Trade Summary: LONG AUD (CMP .6405) TP .6550 & SL .6335
