FXStreet (Delhi) – Research Team at Westpac, notes down the market reaction of the recently relased RBA’s December rate decision. Key Quotes “FX Perspective: AUD/USD approached the RBA statement around 0.7255, having been broadly bid since the upside surprises on Oct building approvals and net exports. The statement produced another pop higher, to 0.7270/75, perhaps in relief that the RBA maintained its view that AUD "is adjusting to the significant declines in key commodity prices", despite the past month's combination of 1 month highs on AUD TWI and new lows on key commodity prices. This indicates a tolerance for AUD strength, at least ahead of the FOMC decision this month where the RBA is likely to be hoping that a Fed rate hike knocks AUD/USD into lower ranges. AUD - where to from here? Until then however, there may be some more upside for AUD/USD. All G10 currencies are up against USD today, an indication of unease in long USD positions despite resilient US yields. Net equity inflow to Australia appears to be adding to AUD/USD demand despite the ongoing pressure on commodity prices. So long as dips remain reasonably shallow near term, short-covering could extend towards the 12 October highs around 0.7380. However, as the RBA notes, commodity prices are still the main game for AUD and continue to point firmly lower multi-week/month, back to AUD/USD0.70 and below. Bond Market Perspective There was no response of note in AU rates markets, as would be expectation given the prior expectations. Looking forward, we would expect market pricing to maintain a mild easing bias, with the terminal rate unlikely to fall below a 50% chance of a 25bp rate cut at worst. That should anchor the front end of the AU yield curve for now, with the longer end now entering a period in which global risk events are expected to be dominant drivers of outright direction and yield curve shape. We remain buyers on dips in the 3yr maturities and will look to fade any offshore-led steepening. However our main expectation is for further AU-US spread compression, especially if the Fed begins its hike cycle in a few weeks.” For more information, read our latest forex news.