GBP/USD extended losses in early New York trade on Tuesday, falling as far as 1.2670 -- its weakest since July 2020 nL2N2WO16K -- as Russian nuclear saber rattling weighed on risk-sensitive sterling, increasing the likelihood of testing support below 1.25.
Sterling, already under pressure from diminishing expectations for aggressive BoE rate hikes this year BOEWATCH, dropped beneath support at late-September 2020 low after Russia accused NATO of creating a serious risk of nuclear war by arming Ukraine nL2N2WN2LW.
The broad dollar safe-haven bid due to the Russian-Ukraine war and China growth uncertainties has been a key hindrance to sterling.
Sterling spec positioning is telling, with the IMM GBP/USD net spec short positioning at its highest level, -58,914 contracts, since late October 2019 while the pound is currently the second-worst performing major currency in 2022, down 6.15%, trailing only the low-rate yen's 10.44% fall.
Should the BoE remain hesitant on rates, GBP/USD's fall could increasingly resemble USD/JPY's rise.
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