Australia dollar barely blinks at rate cut, more priced in

By Wayne Cole

SYDNEY, Aug 12 (Reuters) - The Australian dollar barely budged on Tuesday after the country's central bank cut interest rates as expected and stayed cautious on the outlook for more, leaving markets anticipating a three-month break until the next likely easing.

In a unanimous decision, the Reserve Bank of Australia's policy board trimmed its cash rate by 25 basis points to 3.60%, a two-year low and the third cut in seven months.

Markets had again been fully priced for an easing, having been badly stung by a steady decision on July, given core inflation had slowed toward the middle of the RBA's target band of 2% to 3% while unemployment had popped to its highest since late 2021 at 4.3%. AU/INT

Futures imply only a one-in-three chance of a further easing at the next meeting in September, with most analysts assume the RBA will chose to wait for the third-quarter inflation report due in late October before deciding whether to move in November. 0#AUDIRPR

"The Bank reiterated its view that it "remains cautious about the outlook", which suggests that it will keep easing only once per quarter," said Marcel Thieliant, head of Asia-Pacific economics at Capital Economics.

"Most importantly, the Bank endorsed market expectations of further loosening in its economic forecasts and we think it will ultimately slash rates to 2.85%."

Markets are fully priced for an eventual drop to 3.10% by early next year, with a small chance of reaching 2.85%.

With so much baked in, the Aussie was little moved at $0.6515 AUD=D3, having dipped overnight as its U.S. counterpart firmed broadly. Resistance lies around $0.6540 and $0.6625, with support at $0.6490 and $0.6419.

The New Zealand dollar was steady at $0.5938 NZD=D3, having also eased modestly overnight. Support lies around $0.5925 and $0.5857, with resistance at $0.5971 and $0.6059.

Australian three-year bond futures YTTc1 were unchanged at 96.595, while 10-year yields AU10YT=RR dipped 1 basis points to 4.26%.