[LFX]

The minutes to the RBA’s October meeting suggested that the decision to raise rate by 25bp was finely balanced, so the main point of interest for the market in the November minutes (released early tomorrow) will be whether this balance has shifted. Given that the RBA decided to raise rates again in November and the RBA was rather upbeat in its accompanying statement, analysts expect it to sound more confident about raising rates. However, the RBA is likely to continue to point to a gradualist approach in increasing rates with the economic data determining the pace of tightening. The bills market is aggressively priced for a December rate hike (about a 75% chance of a 25bp rate hike), so an RBA continuing to emphasis a gradualist approach may not be enough to support this pricing, even after last week’s strong employment data. The RBA has not raised rates three times in a row in the past, so the market may be nervous about pricing three in a row this time. The RBA minutes could weigh a bit on AUD, but some continue to expect the data in the run-up to the December meeting to come out strong (investment data will be particularly important) and to support the case for a 25bp rate hike at that meeting.