SYDNEY, Jan 5 (Reuters) - The Australian and New Zealand dollars were headed for their first weekly drop in a month, as still-strong U.S. labour market data led to a slight pullback in rate cut expectations, raising the stakes for the nonfarm payrolls report due later on Friday.
The Aussie was languishing at $0.6712, having fallen for five straight sessions including a 0.4% drop overnight. It is set for a weekly loss of 1.6%, although market reaction to the all-important U.S. payrolls data could be volatile.
Economists polled by Reuters forecast 170,000 jobs were created in December, fewer than the 199,000 the month before. The jobless rate is expected to tick up to 3.8% from 3.7% previously.
The kiwi dollar was idling at $0.6240 after easing 0.2% overnight. It is headed for a weekly loss of 1.4%, the biggest since early December.
Overnight, jobless claims data and a private payrolls report suggested the U.S. labour market remained resilient, again dashing some market hopes about early and aggressive interest rate cuts from the Federal Reserve this year.
Ten-year Treasury yields rebounded to just an inch below 4% and futures trimmed the chance of a U.S. rate cut in March to about 68% and wagered on less than 140 basis points (bps) of easing for all of 2024.
"Markets are just not yet seeing enough from the macro data to validate the dramatic fall in market rates seen at the tail end of 2023," ING analysts said in a note to clients.
"While it's true that the inflation reduction story is solid in the U.S., it still needs to be fully delivered, and that can still take some time."
Australian bonds also snapped a five-week winning streak. Ten-year yields jumped 7 bps to 4.113% on Friday, up 15 bps on the week. Three-year yields also rose 15 bps this week to 3.755%. (Reporting by Stella Qiu; Editing by Jamie Freed)
