By Wayne Cole
SYDNEY, Jan 10 (Reuters) - The Australian and New Zealand dollars added to broad gains on Tuesday after their U.S. counterpart ran into more profit-taking and political jitters saddled the British pound with its worst selloff in five months.
The Aussie dollar AUD=D4 was firm at $0.7380, after rising 0.7 percent overnight. It now faces tough chart resistance in the $0.7386/96 zone.
The New Zealand dollar NZD=D4 was up at $0.7037, after gaining 0.9 percent overnight, but again faces stiff hurdle around $0.7060.
Both were helped along by a steep fall in the sterling on investors' concerns the UK government was heading for a "hard Brexit", where border controls are prioritised over market access and free trade.
In response, the Aussie jumped 1.9 percent to 0.6043 pounds AUDGBP=R for the largest single day gain since August. It was last trading at 0.6063, heights last seen in mid-November.
Domestically, Australian data on retail sales undershot forecasts with a rise of only 0.2 percent, but that still left consumer spending on a firmer track for the fourth quarter. with the slightly weaker result for November, we are still comfortable expecting Q4 real consumption growth to have picked up," said Michael Turner, a strategist at RBCCM.
"Also, a good Christmas is much more important than a good November and, in that regard, most anecdotes have been positive, particularly for consumer durables."
All the signs are the economy had returned to growth after a shock contraction in the September quarter, lessening the need for further stimulus from the Reserve Bank of Australia (RBA).
The futures market 0#YIB: has priced out almost any chance of a further cut in the 1.5 percent cash rate and instead it is toying with the chance of a hike late in 2017.
Australian government bond futures edged higher on Tuesday in line with a bounce in Treasuries. The three-year bond contract YTTc1 added 4 ticks to 98.000, while the 10-year contract YTCc1 rose 6 ticks to 97.2600.
New Zealand government bonds 0#NZTSY= joined the rally, with cash yields falling as much as 6 basis points. (Editing by Shri Navaratnam)