GBP/USD SURRENDERS GAINS AS USD INDEX EXTENDS RECOVERY AHEAD OF US INFLATION I

• GBP/USD has dropped below 1.2420 again amid a decent recovery in the USD Index.
• The USD Index has been backed by China-Taiwan tensions and rising hopes of one more rate hike from the Fed.
• S&P500 futures have turned negative as investors are anxious about the quarterly earnings season.

The GBP/USD pair has surrendered its entire gains generated in the early Asian session. The Cable has dropped back below 1.2420 as the US Dollar index (DXY) has extended its recovery to near 102.15. The USD Index has been backed by China-Taiwan tensions and rising hopes of one more rate hike from the Federal Reserve (Fed).

Meanwhile, S&P500 futures have turned negative after surrendering their entire gains as investors are confident about the recession in the United States economy. Also, investors are anxious about the initial quarterly earnings season of CY2023. Negative market sentiment has trimmed the appetite for risk-perceived assets. The return offered on 10-year US Treasury bonds has dropped below 3.38%.

Deepening China-Taiwan tensions after Taiwan received support from the US administration has triggered the risk-off mood. Taiwan Ministry has reported 58 Chinese aircrafts encircling Taiwan Island.