At its December meeting, the RBA explained that it will decide on the future of its bond purchase program at the February meeting.
The central bank will make three considerations: [1] the actions of other central banks; [2] how the Australian bond market is functioning; and, most importantly, [3] the actual and expected progress towards the goals of full employment and inflation consistent with the target.
We think that there is evidence that all three of these considerations have been sufficiently met in recent weeks, and means the RBA is running out of excuses to keep their QE program running.
It’s also worth noting that AUD is still the biggest net-short position held by large speculators among the major currencies, which means AUD is likely going to be more sensitive to hawkish RBA developments compared to dovish, as a lot of bad news has been priced in.
As always, we have more on this and how we can take advantage of it in our week ahead video.