Never miss a story from Ilya Spivak

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Ilya Spivak

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Australian Dollar Rebound May Stall on FOMC Minutes, US CPIAustralian Dollar Rebound May Stall on FOMC Minutes, US CPI

Fundamental Forecast for the Australian Dollar: Bearish

  • Aussie Dollar Soars as Upbeat Jobs Data Scuttles RBA Rate Cut Bets
  • FOMC Minutes, US CPI May Cap Aussie Gains on Policy Divergence
  • Find Key Turning Points for the Australian Dollar with DailyFX SSI

The Australian Dollar mounted a spirited recovery last week after an impressively strong set of employment figures crossed teh 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.

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.