• Markets are pricing 22 bps - so 88% chance of 25bps RBA rate cut Feb. 18

• 90% of polled economists are expecting RBA to cut

• Overnight expiry options now include RBA, but volatility risk premium is low

• Overnight AUD/USD implied volatility 12.5 - premium/break-even 33 USD pips

• That's consistent with a regular and relatively quiet FX trading day

• Other expiry dates have fallen to new lows since Summer 2024

• But, a hawkish cut could raise volatility, a surprise hold would boost AUD
Overnight expiry AUD/USD implied volatility now includes RBA


AUD/USD FXO implied volatility

(Richard Pace is a Reuters market analyst. The views expressed are his own)