The Australian dollar has continued to outperform at the start of this week following the Reserve Bank of Australia’s latest policy meeting. As the RBA is expected to speed up and potentially end QE as soon as at the February meeting, the aussie is set to enjoy further gains, economists at MUFG Bank report.

AUD boosted by an upbeat tone by the RBA

“The AUD has benefitted both from fresh policy stimulus in China and from heightened speculation that the RBA could bring an earlier end to their QE programme next year.”

“A decision by the Fed to speed up QE tapering alongside could encourage the RBA to speed up tapering plans as well early next year.” 

“The tone of the statement does suggest that the RBA is expecting the Australian economy to continue recovering in the year ahead which will require a further withdrawal of policy stimulus.”

“The RBA’s plans for rate hikes only as early as 2023 are based on the important assumptions that underlying inflation remains low and wage growth modest. If these assumptions are challenged the RBA will come under more pressure to speed up rate hike plans.”