The pound dropped against its major counterparts on Tuesday, as optimism over the election of Rishi Sunak as the U.K. Prime Minister faded.

Sunak was elected as Conservative Party leader on Monday, as his main rival Penny Mordaunt has been dropped out of the leadership race.

Outgoing PM Liz Truss resigned on Thursday as her economic program fuelled concerns about financial stability.

Jeremy Hunt is expected to continue as Chancellor of the Exchequer in a bid to calm financial markets.

United States President Joe Biden said that the victory of Sunak is "pretty astounding" and a "ground-breaking milestone."

The GBP/USD pair edged down to 1.1271, from a high of 1.1325 seen at 8:50 pm ET. The currency may find downside target around the 1.09 level.

The pound pulled back to 167.84 against the yen and 0.8758 against the euro, from its early highs of 168.70 and 0.8735, respectively. The pound is poised to find support around 162.00 against the yen and 0.90 against the euro.

The pound retreated to 1.1282 against the franc, from a high of 1.1317 hit at 8 pm ET. The pair had touched a 4-day low of 1.1265 at 5 pm ET. If the pound falls further, 1.04 is possibly seen as its next support level.

Looking ahead, German Ifo business sentiment index for October will be released in the European session.

U.S. consumer confidence index for October and FHFA's house price index and S&P/Case-Shiller home price index for August will be out in the New York session.

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