The Australian dollar rebounded by strengthening for about 0.3 percent to the range of 0.7090s versus the USD. That was happened in the Asian session trading (February 1). 

The announcement of the results of the Australian Central Bank (RBA) meeting confirmed the end of its Quantitative Easing (QE) program in the near future. However, there is one thing. 

It did not signal the rate hike expected by market participants. The RBA this morning kept their rates steady at 0.1%, while stating that the Quantitative Easing programme would end as early as a whole on February 10. 

The Australia's monetary authority said it would monitor the pay growth and other inflation-related developments first before raising interest rates. That is the most possible plan to do. 

RBA Dissapointed Some of the Market Participants 

The RBA said aggregate wage growth was now only rising back to the pre-pandemic trends. That is making it inadequate to maintain its targeted inflation rate over a long period of time. 

Although Australia's inflation rate over the past few months has been higher than expected, the RBA still expects the annual inflation rate to fall again to a range of 2.75%.

Maybe, that will be happened by the end of this year and throughout 2023. The RBA's stance was disappointing for some market players.

Some analysts think that the Aussie risks weakening in the short term. That is although it is likely to strengthen again later if the RBA is willing to declare a "rate hike” in the future. 

RBA is more Dovish than the RBA FOMC

A hike in the RBA rate in May was not factored into the view (although it still accounts for half in the AUD rate now). That was said by Joseph Capurso, a chief international economist at Commonwealth Bank of Australia.

In the United States, the market is already fully accounting for the end of QE and the beginning of the march rate hike. The bottom line is the RBA is dovish compared to the US FOMC.

Besides that, a different view for this policy could weigh on AUD/USD a bit in the near term. Jane Foley as a Rabobank's chief FX strategist Was also argued about one more thing. 

There is a huge risk that Governor Lowe will dismiss the market expectations of a progressive rate hike this year. While this could make the AUD/USD weaken in the near term.

People expect that AUD/USD to recover to the level of 0.74 towards the end of the year as a policy tightening from the RBA becomes more clearly in focus.

The Risks from ECB Monetary Policy Meeting

The euro rose above the 1.1200 threshold against the U.S. dollar in early week trading. After that, this currency was then climbed again to the 1.1260s range on Tuesday. 

The Single Currency is currently supported by easing market turmoil, the USD correction. It is as well as the release of the latest German inflation data. 

However, there are some risks emerging from the European Central Bank's (ECB) monetary policy meeting on Thursday. The release of Preliminer German inflation data on Monday showed growth of 4.9 percent (Year-on-Year) for January 2022. 

The pace was slower than the december's 5.3 percent growth. However, that outperformed the market expectations and remains within its highest range since the early 1990s.

Inflation will still High at the Beginning of this Year

The inflation report fostered confidence for the traders who hoped the ECB would be more hawkish. The example is alluding to changes to its bond-buying program or interest rate hikes in its scheduled meetings. 

As a result, the euro was boosted slightly higher although the ECB officials judged the rise in inflation would only be temporary. 

The ECB's chief economist, Philip Lane, told Verslo žinios on Jan. 25 that inflation would remain high at the start of the year, but fall again towards the end of the year.