Dollar in focus: The Australian and New Zealand Dollars lingered near multi-week lows on Thursday, driven by a combination of factors that included diminishing expectations for US interest rate cuts and disappointing local jobs data.

The Australian Dollar held steady at $0.6560, having touched a two-month low of $0.6525 overnight. A breach of the support level at the 200-day moving average of $0.6583 heightened the bearish technical outlook, with $0.6453 identified as the next potential target.

Meanwhile, the New Zealand Dollar dipped to $0.6118, following a previous session's five-week low of $0.6088. Finding support at its 200-day moving average of $0.6090, the next bearish target is at $0.6055.

Australian jobs data for December revealed a notable decline of 65,100 jobs, reversing the unexpected surge from the previous month and falling well short of the forecasted increase of 17,600 jobs.

The shift was attributed to changes in hiring practices affecting seasonal adjustments, making October and November appear stronger at the expense of December.

Despite overall employment growth throughout the fourth quarter, it did not keep pace with the expansion of the labour force, resulting in a rise in the unemployment rate from 3.6 per cent in September to 3.9 per cent in December.

Tapas Strickland, head of markets economics at NAB, noted that trend employment growth is softer than needed to prevent a rise in the unemployment rate, potentially leading to a gradual increase every three months in 2024.

This easing in the previously tight labour market may alleviate concerns about wage growth for the Reserve Bank of Australia (RBA), making it unlikely for the RBA to raise rates at its February policy meeting. Major banks, including NAB, have adjusted their predictions, signalling the end of the tightening cycle.

However, the market does not currently anticipate rate cuts anytime soon, with futures pricing in the possibility only by November. 

A 40 per cent chance of a quarter-point easing in June and a 60 per cent likelihood in August present challenges for bonds, leading three-year futures down by 8 ticks to 96.160, resulting in losses of 19 basis points for the week. 

Meanwhile, yields on 10-year bonds increased by 21 basis points for the week, reaching 4.290 per cent.

(With Reuters Inputs)