- AUD outperforms on domestic strength, recovering sentiment.

- GBP weighed as UK faces another recession

- Investors reward job market recovery, steadying risk appetite.

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GBP/AUD spot rate at time of publication: 1.7576Bank transfer rate (indicative guide): 1.6950-1.7080FX specialist providers (indicative guide): 1.7160-1.7400More information on FX specialist rates hereThe Australian Dollar outperformed Pound Sterling on Tuesday as global markets stabilised following an earlier sell-off and as investors rewarded further evidence of a robust recovery being under way in the domestic economy after job advertisements rose sharply in December.

The rally in the Aussie Dollar pushed the Pound-to-Australian Dollar exchange rate a further two-thirds of a percent lower, taking it towards the bottom of a sideways range it has held since April.

Australia's Dollar was higher against all major rivals including after being heartened in the overnight session when ANZ said that local job advertisements rose by 9.2% in the final month of the year, taking total advertisements above pre-coronavirus levels and signalling a potential acceleration in the country's recovery.

"The fast-paced recovery in ANZ Job Ads means solid employment gains should continue into early-2021 at least. It also suggests the unemployment rate could fall quite quickly in 2021," says Catherine Birch, a senior economist at ANZ. "For this to occur, we think ANZ Job Ads would have to exceed pre-pandemic levels for an extended period. But we expect challenges in the first half of 2021 will temporarily slow employment growth and delay improvements."

The data suggests the job recovery seen in November, when the unemployment rate fell from 7% to 6.8% after 90k new positions were created or recovered from the coronavirus on top of the 180.4k seen in October, continued into year-end. The data is also further evidence of the recovery that led Australia's Treasury to suggest last month that the economy could avoid an annual contraction for 2020, even after it spent months under 'lockdown'.

Source: ANZ.

This compares favourably with the likes of the UK economy and is another argument in favour of outperformance by the Australian Dollar, which was also lifted by recovering risk appetite among investors Tuesday after the New York Stock Exchange abandoned plans to delist several Chinese telecoms firms.

The Aussie pushed Sterling back in the direction of two-year lows Tuesday as the UK returned to an all-out state 'lockdown' in response to the new, more infectious strain of coronavirus, which may have prompted concerns among investors about the disruption it could yet cause in other countries.

The shutdown is expected to weigh heavily on the UK's services-dominated economy in the first quarter, following a year in which many economists expect GDP to have contracted by more than -10%.

Above: Pound-to-Australian Dollar rate shown at daily intervals.

"The double dip recession will increase pressure on the BoE to deliver further monetary easing as soon as at their next policy meeting in February. We expect speculation to build over the likelihood of the BoE introducing negative rates given the options for delivering more stimulus are becoming more limited. The developments should weigh on the pound and dampen further upside following the last minute Brexit deal," says Lee Hardman, a currency analyst at MUFG.

Tightening restrictions in Europe riled investors to open the new week, leading the Pound to retreat from all major rivals in an underperformance that continued on Tuesday. The Pound-to-Australian Dollar rate was -0.57% at 1.7597.

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GBP/AUD Forecasts Q2 2023 Period: Q2 2023 Onwards Details: Consensus institutional forecast targets + max & min targets. Contributors: Citi, Barclays, Morgan Stanley & more Provider: Global Reach Type: Free Download Please Access Here

{wbamp-hide end}{wbamp-show start}{wbamp-show end}Tuesday's Aussie Dollar price action and recovery for risk assets comes ahead of a runoff election in the U.S. state of Georgia, where control over Congress will be decided through votes for two Senate seats, with implications for the U.S. Dollar as well as risk currencies.

If Democratic Party candidates are able to flip the seats then it'll likely mean more debt-funded financial support can be provided to the economy over the coming months without necessarily requiring a prolonged period of horsetrading in Congress first, which is generally seen as a risk to the U.S. Dollar.

"AUD/USD has nearly reached the 0.7748/78 November 2016 and March 2017 highs which we expect to short-term cap before the advance towards the 2018 peak at .8135 is to continue," says Axel Rudolph, senior technical analyst for currencies, commodities and bonds at Commerzbank. "The cross remains bid while it stays above the three month uptrend line at .7598."

Above: AUD/USD shown at daily intervals.

However, Democrat control over the Senate and a Congressional majority in both chambers could also mean a more onerous regulatory agenda so not all analysts are in agreement that a Republican loss will be taken well by investors.

"When the blue wave scenario looked increasingly likely, US equities (and the AUD) sold off, followed by a smart rally in the days (and weeks) after the election when preservation of the Congressional status quo looked highly probable. Tax, regulatory and bond market concerns evidently won out over the prospect of higher stimulus-driven growth. This suggests risk markets, and the AUD, should take a hit if Democrats take both Georgia seats," says Ray Attrill, head of FX strategy at NAB.