GBP/USD witnesses a dramatic intraday turnaround from a three-week high touched on Tuesday.The risk-off mood and recession fears revive demand for the safe-haven USD and exert pressure.
The GBP/USD pair is seen extending its intraday retracement slide from a three-week top touched earlier this Tuesday and continues losing ground through the mid-European session. The downward trajectory drags spot prices to a fresh daily low, around the 1.1970-1.1965 region in the last hour.
Investors remain concerned about a possible global recession, which is evident from a generally weaker tone around the equity markets. This is assisting the safe-haven US dollar to stage a goodish rebound from the vicinity of a multi-week low touched the previous day, which, in turn, is exerting downward pressure on the GBP/USD pair.
Furthermore, UK politics is seen as another factor that is adding to negative sentiment surrounding the British pound and further contributing to the pair’s intraday turnaround. The combination of factors, to a larger extent, overshadows the prospects for a 50 bps rate hike move by the Bank of England at the upcoming meeting in August.
The global flight to safety, meanwhile, is triggering a fresh leg down in the US Treasury bond yields, which might cap gains for the USD and offer some support to the GBP/USD pair. Traders might also refrain from placing aggressive bets ahead of the highly-anticipated FOMC policy decision on Wednesday and heavyweight US macro data.
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