RBA Running Out of Excuses?
It’s time for the RBA this week, and the only question traders want answered is whether the bank will finally join the party and drop their persistently dovish tone?
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At their December meeting, the RBA explained that they will decide on the future of their bond purchase program at the February meeting and will use three considerations.
These three considerations are:  the actions of other central banks;  how the Australian bond market is functioning; and, most importantly,  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 the AUD is still the biggest net-short position held by large speculators among the major currencies, which means the 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 look to potentially take advantage of it in our week ahead video.
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