GBP/JPY recovers early lost ground to over one-week low, back around 156.00 mark

• GBP/JPY staged a goodish bounce from over a one-week low touched earlier this Tuesday.
• Receding safe-haven demand undermined the JPY and extended some support to the cross.
• Rising bets for more BoE rate hikes acted as a tailwind for sterling and remained supportive.

The GBP/JPY cross recovered over 50 pips from the Asian session low and was last seen trading in the neutral territory, around the 156.00 round-figure mark.

The cross witnessed some selling during the early part of the trading on Tuesday and dropped to a one-week low amid escalating geopolitical tensions, which tends to benefit the safe-haven Japanese yen. Russian President Vladimir Putin upped the ante in a crisis that could unleash a major war and recognized two Russian separatist-held regions - Donetsk and Luhansk - as independent. Putin later ordered to deploy troops into the area to maintain peace and fueled fears about a full-blown East-West conflict.

The development took its toll on the global risk sentiment and triggered a sharp decline in the equity markets, forcing investors to take refuge in traditional safe-haven assets. The nervousness, however, eased after the Russian envoy to the United Nations, Vasily Nebenzya, said during an emergency UN Security Council meeting that we remain open to a diplomatic solution. This, in turn, capped any further gains for the JPY, which assisted the GBP/JPY cross to find support and attract some dip-buying near mid-155.00s.

Apart from this, rising bets for additional interest rate hikes by the Bank of England acted as a tailwind for the British pound and further contributed to the GBP/JPY pair's bounce. It, however, remains to be seen if bulls are able to capitalize on the move amid intensifying Russia-Ukraine conflict. This, along with the lack of progress in talks to resolve the problems with the Northern Ireland protocol of the Brexit agreement, might hold back traders from placing aggressive bullish bets around the GBP/JPY cross.

There isn't any major market moving economic data due for release from the UK, leaving the GBP/JPY cross at the mercy of the broader market risk sentiment. Hence, the market focus will remain glued to developments surrounding the situation in Ukraine, which will play a key role in influencing the broader market risk sentiment. This, in turn, would drive demand for the safe-haven JPY and provide some meaningful impetus to the GBP/JPY cross.

Technical levels to watch