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SYDNEY: The Australian and New Zealand dollars were down sharply on the euro on Friday after the European Central Bank shocked markets with a hawkish turn, though a bounce in U.S. stock futures helped underpin them elsewhere.

The euro jumped more than 1% to a two-month high of A$1.6038 after the ECB voiced “serious concerns” about the trajectory of inflation and opened the door to a rate rise this year, sending bonds yields surging.

The abrupt shift stoked market speculation the Reserve Bank of Australia (RBA) would have to follow suit at some stage, even if it would much prefer to be patient. “The RBA looks increasingly like an outlier as the global central banking stance shifts away from ultra-accommodative settings designed for very different circumstances,” said Su-Lin Ong, chief economist at RBC Capital Markets.

“It risks falling behind the curve, a sentiment our EU economists believe is driving the hawkish shift in stance from the ECB,” she added.

“The RBA will lag the Fed and a number of its global counterparts but unlikely for as long as it currently thinks.”

The market is now wagering on a first hike to 0.25% in June, and at least three more to 1.0% by year end.

Against the U.S. dollar, the Aussie is often used as a proxy for global growth and risk appetite and has developed a habit of tracking every gyration in U.S. stocks no matter the domestic news.

So it got a lift on Friday when a huge rise in Amazon shares boosted Nasdaq futures and offset heavy losses suffered by Meta on Thursday. That helped the Aussie hold at $1.7140, giving it a gain for the week of 2.0%, which reversed most of last week’s steep losses. It still faces stiff resistance in the $0.7168/80 zone, with support around $0.7110.

The kiwi dollar stood at $0.6675, having rallied 1.9% on the week so far and away from a recent 16-month low of $0.6531. The next major retracement target is $0.6710, while support lies at $0.6610.

Both still have to navigate the January U.S. payrolls report where there is talk it could show a sharp fall in jobs, in part because many who were ill or isolating with coronavirus would not have been counted as employed.

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