The GBP/USD pair has lost its traction and dropped to the 1.2200 area in the early European session on Tuesday. The negative shift witnessed in risk mood is making it difficult for the British pound to find demand but buyers could look to remain active as long as the 1.2160 support holds.
Although the UK’s FTSE 100 Index trades flat, US stock index futures are down between 0.5% and 0.8%. This suggests that Wall Street’s main indexes could start the day deep in negative territory following Monday’s choppy action.
In case safe-haven flows continue to dominate the markets, the dollar could gather strength and weigh on GBP/USD. It’s also worth noting that the benchmark 10-year US Treasury bond yield is down nearly 1% at 2.55%, limiting the greenback’s gains for the time being.
In the absence of high-tier macroeconomic data releases, the risk perception should continue to impact the market action.
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