[ForexNews]

The RBA left its policy rate unchanged at 3.00%, which was in line with the unanimous market consensus. The RBA dropped "...the outlook for inflation allows some scope for further easing of monetary policy...," from the accompanying statement. This along with the continued improvement in local and global data suggests that the RBA has shifted to a neutral bias, from an earlier modest easing bias.

Like so many other G10 central banks, however, the RBA has indicated that rates will likely remain low for a long time. In particular the RBA thinks that, "...the most likely outcome...is a period of sluggish output (growth)..." and "...and growth is likely to firm into 2010..." We think that the market is currently too aggressively priced for rate hikes (about 30bp worth of rate hikes by year end). We expect the impulse from the fiscal stimulus to drop out of the local data over the coming months and lead the market to push its expectation for rate hikes back to early 2010. This could provide opportunities to buy the AUD on dips, as we expect the strong recovery EM Asia growth to continue and keep the currency on an upward trend.