Forex Today: Escalating geopolitical tensions weigh on sentiment

Here is what you need to know on Tuesday, August 2:

Markets have turned risk-averse amid escalating geopolitical tensions on Tuesday. The dollar stays relatively resilient against its major rivals and global equity indexes stay on the back foot. The Shanghai Composite Index lost more than 2%, the Euro Stoxx 600 Index is down 0.7% after the opening bell and US stock index futures are falling between 0.55% and 0.9%. JOLTS Job Openings will be the only data featured in the US economic docket and investors will pay close attention to political developments. Chicago Fed President Charles Evans and St. Louis Fed President James Bullard will be speaking later in the day as well.

Reports of US House of Representatives Speaker Nancy Pelosi planning to visit Taiwan caused safe-haven flows to dominate the financial markets in the Asian session. “There will be serious consequences if she insists on making the visit," Chinese foreign ministry spokesperson Zhao Lijian said. Additionally, Global Times commentator Hu Xijin tweeted out that Beijing has formulated a series of countermeasures, including military actions. in response to Pelosi's possible visit to Taiwan.

Earlier in the day, the Reserve Bank of Australia (RBA) announced that it raised its policy rate by 50 basis points (bps) to 1.85% as expected. In its policy statement, the RBA said the hike was a further step in the "normalization" of policy but removed the term "extraordinary" stimulus from its policy statement. This change of language cause the AUD to come under heavy pressure and AUD/USD was last seen losing 1.4% on the day at 0.6925.

Pressured by risk-aversion, EUR/USD has erased a large portion of Monday's gains and extended its slide toward 1.0200.

GBP/USD dropped below 1.2200 in the early European session on Tuesday and was last seen losing 0.5% on a daily basis.

Despite falling US Treasury bond yields, gold is struggling to preserve its bullish momentum and trading in negative territory near $1,770.

Bitcoin is edging lower as market mood sours and trades below $23,000. Ethereum continues to push lower toward $1,500 after having closed the last four trading days in the red.