The Australian and New Zealand dollars added to broad gains on Tuesday after their US counterpart ran into more profit-taking and political jitters saddled the British pound with its worst selloff in five months. The Aussie dollar 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 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 for the largest single day gain since August. It was last trading at 0.6063, heights last seen in mid-November. Australian government bond futures edged higher on Tuesday in line with a bounce in Treasuries. The three-year bond contract added 4 ticks to 98.000, while the 10-year contract rose 6 ticks to 97.2600. New Zealand government bonds joined the rally, with cash yields falling as much as 6 basis points.
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. "Even 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."