In my endless quest to make it unnecessary to leave the IDE, I figured it would make sense to use Git bash as my terminal in Android Studio rather than the default cmd.exe on Windows.
Turns out this is really simple.
1. Open your settings in Android Studio (CTRL-ALT-S) and type ‘terminal’ to find the correct settings.
2. Change the Shell path to Git bash. In my case it was ‘C:\Program Files (x86)\Git\bin\sh.exe –login -i‘. I just copied this from the start menu shortcut’s properties.
3. Restart your IDE.
4. Profit. You can bring up the terminal window with ALT-F12, so no need to use the mouse.
Optionally, you can change the console colors in Editor > Colors & Fonts > Console Colors. Just remember to restart your IDE if you change them. If you are on the Darcula theme this is not necessary – everything just works.