The RBA’s next monetary policy decision falls on April 1, 2026. Markets are currently pricing a 35% probability of a 25 basis point cut to 3.85%, with the remaining 65% expecting a hold at 4.1%.

That’s a meaningful level of uncertainty. When probability is split 65/35 rather than 90/10, the market is genuinely unsure—which means the AUD will react sharply in either direction.

Here’s what the data is telling us and how to position ahead of the decision.

The Case for a Cut

Several data points support the argument that the RBA should begin easing in April.

Inflation is trending lower. The Q4 2025 trimmed mean CPI came in at 3.2% year-on-year, down from 3.5% in Q3 and 3.9% in Q2. The trend is clearly in the right direction. The RBA’s target band is 2-3%, and at the current pace of decline, inflation could be within the band by Q3 2026.

The labour market is softening. January 2026 employment data showed a net loss of 12,400 jobs—the first negative print in eight months. The unemployment rate ticked up to 4.3% from 4.1%. While one month’s data isn’t a trend, it aligns with forward indicators like job advertisements and vacancy surveys that have been declining since mid-2025.

Household financial stress is elevated. The Melbourne Institute’s Survey of Consumer Sentiment has been below 85 for four consecutive months, indicating persistent pessimism. Mortgage arrears data from S&P and the RBA’s own financial stability report show rising delinquencies, particularly among borrowers who took out mortgages in 2021-2022 at very low rates.

Global peers are cutting. The ECB, Bank of Canada, and several Asian central banks have already begun easing cycles. While the RBA has historically pursued an independent policy path, prolonged divergence from global peers creates its own pressures—particularly on the exchange rate and competitive positioning.

The Case for a Hold

The arguments against an April cut are also substantial.

Wages growth remains elevated. The Wage Price Index grew 3.5% year-on-year in Q4 2025. While this has moderated from the 4.1% peak, it remains above the level the RBA considers consistent with the inflation target. Cutting rates while wages are still growing strongly risks re-igniting inflation, particularly in services sectors where labour is the primary cost.

The March RBA statement was hawkish. As I discussed in my previous analysis, the March statement language shifted in a hawkish direction, describing inflation as “remaining higher than acceptable.” It would be unusual for the RBA to signal hawkish concern in March and then cut in April. Central bank communication typically prepares markets for decisions, and the March statement didn’t prepare markets for imminent easing.

Housing market resilience. Despite higher rates, Australian house prices have continued rising in most capital cities. CoreLogic data shows a national 4.2% annual increase through February 2026. The RBA is acutely aware that cutting rates could further inflate housing prices, worsening affordability—a politically sensitive issue.

The RBA’s new framework. Under the reformed monetary policy framework implemented in 2024, the RBA board meets less frequently (eight times per year instead of eleven) and has committed to more deliberate decision-making. This structural change biases toward slower action—waiting for more data before changing direction.

What Market Pricing Tells Us

Interest rate futures and overnight index swap (OIS) pricing currently imply:

• April 2026: 35% probability of a cut
• June 2026: 65% probability of a cut (cumulative)
• August 2026: 80% probability of at least one cut (cumulative)
• December 2026: Two cuts fully priced (~50 bps of easing)

This curve tells us that markets expect the easing cycle to begin in 2026, but there’s genuine uncertainty about the timing. April is possible but not the base case. June is the median expectation.

For AUD traders, the key insight is that a hold in April won’t necessarily strengthen the AUD unless it’s accompanied by hawkish guidance that pushes out expectations for any cut. The market has already largely priced a hold.

An April cut, on the other hand, would be a surprise that could push AUD/USD down 50-80 pips initially, as markets reprice the easing cycle as more aggressive than currently expected.

The Forward Guidance Question

Regardless of the rate decision, the RBA’s accompanying statement and subsequent press conference will be more important for AUD direction than the decision itself.

Hawkish hold: “Inflation remains too high. Further tightening cannot be ruled out.” This would push AUD higher as markets price out near-term cuts.

Neutral hold: “Inflation is declining but not yet within target. The Board will continue to monitor data.” This maintains current pricing and likely produces limited AUD movement.

Dovish hold: “Inflation progress is encouraging. The Board is gaining confidence that restrictive policy is working and is prepared to adjust if trends continue.” This would push AUD lower as markets bring forward cut expectations.

Cut with cautious guidance: “The Board judged that conditions warranted a modest adjustment. Further easing is not predetermined.” This would initially weaken AUD but the cautious framing might limit the move.

Using AI-powered analysis of RBA communication patterns, the most likely scenario is a neutral-to-slightly-dovish hold—maintaining the current rate while shifting language to acknowledge progress on inflation. This would modestly support expectations for a June cut without committing to one.

Positioning Suggestions

For AUD/USD traders:

• A hold with hawkish guidance favours short-term AUD longs, targeting 0.6400-0.6450
• A hold with dovish guidance or a cut favours AUD shorts, targeting 0.6150-0.6200
• Given the uncertainty, options strategies (straddles or strangles) around the event offer asymmetric payoff potential

For Australian businesses managing currency exposure:

• Importers paying USD might consider partial hedging ahead of April 1 if a dovish outcome (which would weaken AUD) seems likely
• Exporters receiving USD face the opposite risk—AUD strengthening on a hawkish hold would reduce AUD-equivalent revenues

The April RBA meeting isn’t likely to be a defining moment for monetary policy. But in a market where AUD/USD is range-bound and waiting for a catalyst, any surprise—in either direction—could trigger a meaningful move.

Watch the statement language as closely as the rate decision. The words matter more than the number.