Forex Market: GBP/USD falls from three-month highs due to a shift in risk sentiment, Brexit uncertainty also weighs

GBP/USD came off fresh three-month highs and was set to end an eight-day streak of gains on Tuesday, as the US Dollar and other safe haven assets received a boost after China’s education ministry advised students going overseas “to conduct a good risk assessment and be cautious about choosing to go to Australia or return to Australia to study.”

The Ministry of Education cited numerous cases of racial discrimination and violence, in which Asians had been targeted, during the coronavirus pandemic. Relations between trading partners Australia and China have been severed after Australia’s government proposed an international inquiry into how the Wuhan-originated COVID-19 outbreak transformed into a global pandemic.

“Sterling is highly sensitive to these changes in risk sentiment – it’s a more risky currency than it was a couple of months ago and some years ago,” Ulrich Leuchtmann, head of FX and commodity research at Commerzbank, said.

Meanwhile, coronavirus death toll in the UK rose to 51,766 on Tuesday, latest data showed. The country remains the most severely hit in Europe and the second most severely impacted by the pandemic worldwide.

In addition, Brexit uncertainty continued being a cause of concern, with little progress been made in EU-UK trade talks so far.

As of 11:45 GMT on Tuesday GBP/USD was retreating 0.44% to trade at 1.2668, after touching an intraday high of 1.2756 during the early phase of the Asian session. It has been a level not seen since March 12th (1.2849).

In terms of economic calendar, today market players will be expecting the monthly JOLTS report. The number of job openings in the United States probably decreased to 5.750 million in April, according to market expectations, from 6.191 million in March. The latter has been the lowest level since May 2017 due to the coronavirus crisis. The official report is due out at 14:00 GMT.

At 14:30 GMT Bank of England Deputy Governor, Financial Stability, and Monetary Policy Committee member Jon Cunliffe is scheduled to speak at Investment Association webinar.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 22.2 basis points (0.222%) as of 10:15 GMT on Tuesday, down from 23.1 basis points on June 8th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.2696
R1 – 1.2764
R2 – 1.2804
R3 – 1.2872
R4 – 1.2940

S1 – 1.2656
S2 – 1.2588
S3 – 1.2548
S4 – 1.2508

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