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Australian, New Zealand dollars save stamina for data hurdles later in week

[SYDNEY] The Australian and New Zealand dollars marked time on Monday as markets awaited key data due later in the week which could decide whether interest rates in both countries might be cut anytime soon.

The Aussie was a fraction firmer at US$0.6876, but bound by chart support around US$0.6850 and resistance at last week's top of US$0.6933.

The kiwi dollar idled at US$0.6615, well within last week's trading range of US$0.6586 to US$0.6664.

Both face major data hurdles this week with the Australian labour report due on Thursday and New Zealand consumer prices (CPI) the day after.

The jobs number could be critical for whether the Reserve Bank of Australia (RBA) cuts rates at its Feb 4 policy meeting given the central bank's board highlighted risks to employment at its December meeting.

Median forecasts are for a rise of 15,000 net new jobs, following November's surprisingly large gain of 39,900, with unemployment staying at 5.2 per cent.

"A repeat of the strong November outcome could be enough to convince the RBA that the 'gentle turn' in the economy is continuing," said ANZ's head of Australian economics David Plank.

"It would offset some of the data pointing the other way, such as weak consumer spending in Q3 and the recent decline in consumer confidence."

Mr Plank, however, looks for an increase in jobs of just 5,000 for December

"If we couple this with the downward pressure on the RBA's economic forecasts from soft consumer spending, then a February rate cut is the likely result," he added.

Consumer confidence has taken a hit in recent weeks as bushfires swept through the east of the country and swathed major cities in harmful smoke.

That has left the market split on whether the RBA will go as early as February, with futures implying a chance of around 46 per cent. A quarter-point easing to 0.5 per cent is almost fully priced by May, however.

The three-year bond future were at 99.245, implying a yield of 0.755 per cent, while the 10-year contract stood at 98.8050.

New Zealand's CPI is forecast to have risen 0.4 per cent in the December quarter, nudging annual inflation up to 1.8 per cent from 1.5 per cent but still leaving it below the middle of the Reserve Bank of New Zealand's (RBNZ) 1-3 per cent target range.

"Further lifts in underlying inflation will give the RBNZ confidence that keeping the cash rate unchanged at 1 per cent is about right," said Jarrod Kerr, chief economist at Kiwibank.

"However, inflation is certainly not guaranteed to settle around 2 per cent over the medium term...there remains hesitancy and caution among firms."

The market has all but given up on a near-term rate cut with a move in February put at just a 7 per cent chance. An easing by June is seen as a 33 per cent probability.