GBP/USD drops to near 1.3200 due to risk-off mood amid rising tensions in the Middle East

• GBP/USD depreciates due to risk aversion amid rising geopolitical tensions in the Middle East.
• The US Dollar receives support as Treasury yields continue to gain ground.
• The BoE advocates a cautious approach to reducing rates, considering the persistently high inflation in the services sector.

GBP/USD extends its losing streak for the third consecutive day, trading around 1.3200 during the Asian session on Thursday. The risk-sensitive GBP/USD pair receives downward pressure due to the safe-haven flows amid escalating Middle-East tensions.

The Israeli Broadcasting Authority (IBA) reported that Israel's security cabinet has decided to issue a strong response to the recent Iranian attack. On Tuesday night, Iran launched over 200 ballistic missiles and drone strikes on Israel.

The improved US Treasury yields are supporting the US Dollar and undermining the GBP/USD pair. The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, continues to gain ground for the fourth successive session. The DXY trades around 101.80 with 2-year and 10-year yields on US bonds standing at 3.65% and 3.79%, respectively, at the time of writing.

On the data front, the ADP US Employment Change reported an increase of 143,000 jobs in September, exceeding the anticipated 120,000 jobs. Furthermore, annual pay increased by 4.7% year-over-year. The total number of jobs added in August was revised upward from 99,000 to 103,000.

The Bank of England (BoE) has been advocating a cautious approach to reducing interest rates, considering the still-high inflation in the services sector and relatively robust economic growth. In its quarterly statement released on Wednesday, the BoE's Financial Policy Committee (FPC) noted that "risks to UK financial stability are broadly unchanged since June."

BoE policymaker Megan Greene warned that a consumption-driven recovery in the United Kingdom (UK) could trigger a new wave of inflation. However, Greene noted that further interest rate cuts are likely, as prices are "moving in the right direction."