RBA ends the year on hold

The final RBA board meeting for this year will be held on Tuesday, with the Governor speaking on the economy the next day, shortly before the release of Q3 GDP. The RBA is expected to remain on hold, albeit with an easing bias. This rhymes with the Governor's comments last week, when he answered a question on the cash rate by saying, "We've got Christmas [and] we should just chill out, come back and see what the data say."

Q3 GDP (Wednesday) is likely to rebound strongly - a 1.1% gain is expected in the quarter after a fairly flat result in Q2. Most of the rebound reflects volatility in commodity exports, which fell sharply in Q2 as weather disrupted shipments and have rebounded in Q3. This should be enough to lift annual growth back to the mid-2s. With RBA likely on hold (already priced in by market), an expected GDP rebound, and risk of ECB over-delivering, continue to see AUD outperformance versus the EUR.