GBP/USD off multi-week low, remains depressed near 1.3500 amid Ukraine tensions

• GBP/USD dropped to a near four-week low amid a strong pickup in demand for the safe-haven USD.
• Russia’s invasion of Ukraine spooked investors and triggered a massive sell-off in the equity markets.
• Tumbling US bond yields capped the USD and helped limit losses for the pair amid BoE rate hike bets.

The GBP/USD pair maintained its offered tone heading into the European session, albeit has managed to rebound a few pips from a more than three-week low touched earlier this Thursday. The pair was last seen trading just above the 1.3500 psychological mark, down nearly 0.30% for the day.

Following the previous day's turnaround from the 1.3620 area, the GBP/USD pair witnessed selling during the early part of the trading on Thursday a strong pickup in demand for the US dollar. Russia's invasion of Ukraine triggered a fresh wave of the global risk-aversion trade, which was evident from a sell-off in the equity markets. This, in turn, boosted the greenback's relative safe-haven status and exerted downward pressure on the major.

NATO also confirmed that an official invasion of Ukraine has begun and correspondents reported that Russian forces have entered Ukraine from Crimea. Moreover, reports indicated that Russian forces are attacking the Ukrainian border around Belarus. Adding to this, Ukraine border guards said that an attack is also coming from Crimea. This kept investors' on the edge and continued underpinning traditional safe-haven assets, including the greenback.

That said, a slump in the US Treasury bond yields held back the USD bulls from placing aggressive bets. The recent geopolitical developments might have forced investors to scale back expectations for a more aggressive policy stance by the Fed to combat high inflation. This, along with the global flight to safety led to a steep decline in the US bond yields and kept a lid on the further gains for the buck, at least for the time being.

Apart from this, rising bets for additional interest rate hikes by the Bank of England acted as a tailwind for the British pound. This was seen as another factor that helped limit the downside for the GBP/USD pair. That said, any meaningful recovery still seems elusive as the market focus will remain on the situation in Ukraine. The Russia-Ukraine saga will drive demand for the safe-haven USD and continue to infuse volatility around the GBP/USD pair.

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