Depending who you read, the rate cut from the RBA overnight was expected or unexpected. The difference of opinion depends whether you take the polls of bank economists (where around 25% were looking for cut), vs. what was priced into markets. After the RBNZ change in tone from last week, the chances had certainly increased, with the 2Y bond in Australia trading below 2%, in other words 50bp below the cash rate. In normal times with no expectations of rate move, this would trade some 10-20bp above the cash rate. If we look at the pricing prevailing in the overnight swaps markets, this suggest that markets were seeing a 60% probability of a rate ahead of the event. Quite often there is a difference between what bank research economists say (there is always some inertia to change one’s view) and what the market prices (markets are there to clear the market in different views). This time, it was the market that proved correct, but the reaction on the Aussie reflects the fact that it was not fully expected.