RBA to end QE and bring forward rate hike guidance: AUDUSD

The RBA meets next Tuesday, February 1st, for the first time in 2022. Employment and inflation data have beaten expectations by sufficient margin to encourage the bank to take its next shift to further policy normalization, earlier than anticipated at its last meeting in December.



The recovery in the labour market has continued to impress post the re-opening in October. The Australian economy added +64.8k jobs in December on top of the 366k jobs created in November. The seasonally adjusted unemployment rate fell to 4.2% from 4.6%, its lowest level since pre the Global Financial Crisis, August 2008.

Headline consumer prices for the December quarter rose by 1.3%, higher than the 1% expected by economists taking the annual inflation rate to 3.5%. The trimmed mean or core inflation (the RBA’s preferred inflation gauge) rose by 1%, taking the annual rate to 2.6%. Notably, the annual rate of core inflation is now above the mid-point of the RBA’s target 2-3% band for the first time since mid-2014. 

The RBA has repeatedly stressed that wages growth around 3% will be necessary to sustain inflation within that band. Wage inflation is currently at ~2.2%yoy, which will see a lot of focus on the next wage inflation print on February 23rd.


What will the RBA do next week?


The RBA will likely end its $350 billion quantitative easing (QE) bond buying program next week and bring forward its rate hike guidance towards the first half of 2023. This is in contrast to the interest rate market currently pricing rates lift off in April and a further three rate hikes by December 2022.


What does it mean for the AUDUSD?


The AUDUSD has sagged under the weight of the stronger U.S. dollar post the hawkish FOMC meeting yesterday, and is eyeing strong horizontal support near .7000c.

Should the AUDUSD see a sustained break below .7000/.6990c, it would then see the AUDUSD move initially towards the June 2016 low at .6826, before .6675.


AUDUSD Daily Chart 28th of Jan

Source Tradingview. The figures stated areas of January 28th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation


How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade




Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.