The Australian and New Zealand dollars lost ground on Thursday...

The Australian and New Zealand dollars lost ground on Thursday as markets wagered on an ever-more aggressive cycle of U.S. rate rises that would threaten both the outlook for global growth and the bull run in commodities.

The Aussie was back at $0.7487 AUD=D3 , having shed 0.9% overnight as the U.S. dollar climbed broadly. The retreat from the recent 10-month top of $0.7661 puts the focus on support around $0.7485 and $0.7450.

The kiwi dollar recoiled to $0.6896 NZD=D3 , away from its five-month high of $0.7034. A sustained break of the 200-day moving average at $0.6909 would risk a test of $0.6865.

A very hawkish set of Federal Reserve minutes on Wednesday added to the frenzy to price in rises in U.S. interest rates, with futures 0$FF: now implying they will reach 2.5-2.75% by year-end, from 0.25-0.5% now. FEDWATCH

That would require 225 basis points of hikes in just seven Fed meetings, easily one of the fastest cycles on record.

Investors have also priced in more tightening by the Reserve Bank of Australia (RBA), though not quite to same extent. Futures 0#YIB: now imply Australian interest rates of 2.0% by year-end, with the first move up from the current 0.1% in June.

All the four of Australia's largest banks are now tipping a June start, with Westpac the latest to shift.

Bill Evans, Westpac chief economist, said a stronger labour market was now likely to see unemployment fall to 3.25% by year-end, pushing wage growth up sharply to a peak of 4% in 2023.

"The changed labour market situation and what looks to be a more urgent approach from the RBA Board signals an earlier beginning to the cycle," said Evans.

He sees five hikes this year taking rates to 1.25%, and another three next year for a cycle top of 2.0%. The futures market, on the other hand, implies a peak around 3.25-3.5%.

Bond markets are not yet as hawkish as futures, with three-year yields AU3YT=RR at 2.51%, while 10-year yields AU10YT=RR held at 2.92%. That saw the spread over U.S. bonds narrow to 35 basis points from a top in March around 50 basis points.

Investors are also beginning to fret that such drastic tightening is likely to slow economic growth across the developed world and risk recession, particularly in Europe where energy costs are soaring.

That outlook would not be especially bullish for commodity demand overall, even if a protracted conflict in Ukraine tended to keep energy prices higher for longer.