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  • GBP/USD extends losses from 1.2756, the highest since March 12, 2020.
  • UK could reopen non-essential retail soon as virus-led deaths slump to the pre-outbreak stage.
  • Market optimism fades amid mild challenges to the previous risk-on sentiment.
  • Britain and Japan will discuss the post-Brexit trade deal on Tuesday, no major data/event up for publishing.

GBP/USD snaps eight-day winning streak while declining to 1.2711, down 0.10% on a day, during the pre-London open trading on Tuesday.  While fundamentals concerning the British Pound remain mostly positive, except for the Brexit, the US dollar’s U-turn seems to have paved the way for the Cable’s latest drop.

Be it upbeat prints of the UK’s BRC Like-For-Like Retail Sales or a slump in the coronavirus (COVID-19)-led deaths to the pre-lockdown period, catalysts concerning Britain stay bright. Also favoring the bulls could be the likely UK-Japan trade deal, negotiations for which will kick-start today.

On the other hand, the US dollar seems to have benefited from the risk reset following an escalation in geopolitical tensions between the Korean neighbors. Further weighing on the risk-tone sentiment could be the Aussie-China tension and temporary closure of oilfield in Libya.

Amid all these catalysts, the US 10-year Treasury yields drop four basis points (bps) to 0.844% whereas stocks in Asia and the US stock futures print mild losses as we write.

Against this backdrop, the US dollar index (DXY), a gauge of the greenback versus the major currencies, gains 0.05% to 96.73 by the press time.

Moving on, a lack of major data/events could push the Cable traders to look for further details on risk catalysts for a fresh impetus. In doing so, the UK-Japan trade talks and the US-China tension might offer hints and can help the greenback to recover some more of its losses from the late-May.

Technical analysis

With the successful trading above 200-day SMA, at 1.2685 now, the Cable is likely to remain strong and directed towards 1.2800 round-figure. In a case where the GBP/USD prices drop below 1.2685, May 08 top near 1.2465 could return to the charts.

 

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