Australia, NZ dollars set for 2nd week of gains, US tariffs major risk

By Stella Qiu

SYDNEY, July 4 (Reuters) - The Australian and New Zealand dollars were set on Friday to rack up a second straight week of gains, after a volatile overnight session as a beat in U.S. jobs data lengthened the odds for earlier rate cuts there.

Next week's outlook is less certain, with a U.S. tariff deadline approaching on July 9. President Donald Trump said overnight that letters Washington will start sending on Friday would lay out the tariff rates countries face on U.S. imports.

Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, expects the next big move in Australia to be down, rather than up.

"If President Trump unilaterally reapplies high tariffs on July 9 or August 12 on the expiry of his two tariff truces, currency markets could become very volatile in a repeat of early April," Capurso said.

"AUD/USD and NZD/USD could quickly drop by 2, 3 or even 4 U.S. cents in the middle of July and August."

The Aussie AUD=D3 was flat on Friday at $0.6572, off an intraday low of $0.6537 overnight before recovering some losses to finish down just 0.2%. For the week, it is up 0.6%.

Near-term resistance is at an eight-month peak of $0.6544, with the next bull target up at $0.6687.

The kiwi dollar NZD=D3 was little changed at $0.6071, having hit an intraday low of $0.6031 overnight before trimming losses to finish 0.3% lower. For the week, it is up 0.3%.

More support lies at $0.6040, with resistance at the nine-month peak of $0.6120.

The closely watched U.S. jobs report surprised on the upside as markets gave up on the chance of a July rate cut from the Federal Reserve. Even a move in September is in doubt, with futures pricing in a 74% probability of one. 0#USDIRPR

Despite the hawkish turn in Fed pricing, markets are still convinced the Reserve Bank of Australia will cut rates on Tuesday for a third time this year to 3.6%, which is about 95% priced in. 0#AUDIRPR

A Reuters poll showed that 31 of 37 economists predicted a cut next week, while the rest, including Citibank and BlackRock, saw no change.

Household spending in May rose 0.9% for its fastest pace in seven months, data showed on Friday, although that followed three months of meagre growth.

The Reserve Bank of New Zealand will meet on Wednesday and is most likely to keep the cash rate steady at 3.25%. Swaps imply a probability of 83% for no move.

A Reuters poll showed 19 of 27 economists expected no change in policy, while eight predicted a 25 bp cut.