The Australian Dollar mounted a spirited recovery last week after an impressively strong set of employment figures crossed the wires. The economy added a net 58.6k jobs in October, dwarfing economists’ forecasts calling for a 15k increase and producing the largest monthly increase in since March 2012. The jobless rate dropped to 5.9 percent, the lowest in 19 months.

The currency pushed higher alongside a surge in front-end bond yields, suggesting the upbeat report undermined RBA easing speculation. Indeed, the priced-in probability of a rate cut at next month’s meeting has plunged to just 8 percent, down from 67 percent just a week ago. The longer-term outlook has also shifted, with traders pricing out the probability of another 25 basis point reduction in the cash rate over the coming 12 months.

The move higher may prove short-lived however as external forces re-take the spotlight. Minutes from the Federal Reserve’s October meeting are in focus. The policy announcement seemed decidedly hawkish and markets interpreted it as such, with the US Dollar soaring and Fed Funds futures shifting to imply that traders now see the probability of a December rate hike as close to 70 percent. The tone of subsequent Fed commentary likewise leaned in favor of liftoff.

Fundamental Forecast for the Australian Dollar: Bearish

More of the same on display in the Minutes document may amplify Fed vs RBA policy divergence policy divergence bets, regardless of a more supportive outlook for the Australian monetary authority. US core inflation is expected is expected to register at 1.9 percent for the second consecutive month and may reinforce this dynamic. A print in line with forecasts would fall within a hair of the Fed’s 2 percent target, hinting that headline price growth readings are poised to recover once overhang from last year’s crude oil plunge re-base out of calculations. This threatens to cap Aussie gains and put the currency back on the defensive.