The AUD has been well supported of late, irrespective of weak commodity price developments. Considering unstable risk sentiment and as commodity price developments have been week, the most recent upside should be seen as a reaction to rising RBA monetary policy expectations. Indeed, given central bank members somewhat more constructive stance on the economy, RBA rate expectations have been consistently rising during the last few weeks.
It must be noted too that central bank Governor Stevens indicated this week that no more easing should be expected in the shortterm and that conditions will be re-evaluated in February.
From that angle this week’s rate announcement will unlikely surprise.
Keeping in mind, that speculative short-positioning remains close to elevated territory, further upside correction risk cannot be excluded. From a broader angle, however, we remain of the view that rallies should be sold.
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