Australia, NZ dollars set for solid weekly gains on risk rallies

SYDNEY, July 25 (Reuters) - The Australian and New Zealand dollars headed for solid weekly gains on Friday as the prospect of more U.S. trade deals helped boost risk sentiment, although much is riding on what tariff negotiations and local data bring next week.

The Aussie AUD=D3 slipped 0.1% to $0.6585, having eased 0.2% overnight and come off a nearly nine-month top of $0.6625. It is battling to stay above near-term resistance of 60 cents, but looks set for a weekly gain of 1.2%.

The kiwi NZD=D3 was flat to $0.6026, after slipping 0.3% overnight from a three-week high of $0.6059. For the week, it is up 1.1%.

The two currencies are often traded as proxies for global risk and have been helped by a rally in share markets this week after the U.S.-Japan trade deal fuelled hopes of an agreement with the European Union. The S&P 500 and Nasdaq extended a rally to close at record highs, buoyed by robust earnings from tech giants.

"Trade agreements between the U.S. and the major economies will reduce some of the downside risks to the global economic outlook and AUD/USD," said Carol Kong, a currency strategist at the Commonwealth Bank of Australia.

"Next week's talks between U.S. Treasury Secretary Bessent and his Chinese counterparts in Stockholm may be a catalyst for more AUD/USD gains if an extension of the US‑China trade truce is agreed."

U.S. economic data on Thursday, including services PMIs and jobless claims, was on the strong side, rendering relief to the U.S. dollar, which is down 1% this week after two straight weeks of gains.

Swaps imply an 86% probability the Reserve Bank of Australia will cut rates in August after Governor Michele Bullock shrugged off concerns about a softening labour market in comments that were not as dovish as some in the market had expected. 0#AUDIRPR

All eyes are on second-quarter inflation data due on Wednesday, which the RBA has been waiting for to confirm inflation has been tamed. The RBA expects the trimmed mean measure to come in at a quarterly rate of around 0.6% and Bullock has warned there is a risk it could surprise on the upside.

"We cannot lock in the cash rate cut in August just yet," said Luci Ellis, chief economist at Westpac.

"We do, however, think it is the most likely outcome, especially if the quarterly inflation numbers come in as we expect."

Across the Tasman sea, markets imply around a 75% probability the Reserve Bank of New Zealand will cut the 3.25% cash rate a quarter point at its meeting on August 20. 0#NZDIRPR