CHART: Markets are certain the RBA will hike rates by the middle of 2018

The minutes of the Reserve Bank of Australia’s (RBA) July monetary policy meeting have certainly had an impact.

The optimistic tone, in stark contrast to that seen in the July policy statement released two weeks ago, has seen the Australian dollar jump to a more than two-year high while Australian bond futures have been hit for six.

And, as seen in the chart below from ANZ’s senior rates strategist Martin Whetton, it’s pulled forward the expected timing of a RBA interest rate hike, at least among swaps traders.

Source: ANZ

Overnight index swaps (OIS) are now close to fully priced for 25 basis point hike by July next year, a move in stark contrast to that seen only a few weeks when a rate hike next year was seen as a marginal possibility at best.

While that the view today, there’s several speeches from leading RBA officials arriving in the next few days, including one from deputy governor Guy Debelle on Friday.

If the market is deemed to have got a little ahead of itself there’s plenty of opportunities for RBA to correct this, if it sees the need to do so.

That “if” will dominate discussion in the coming days, and ensures that markets will be highly sensitive to what the RBA conveys.

You can follow Martin on Twitter here. He’s definitely worth adding to your feed.

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