GBP/USD recovers early lost ground to YTD low, moves back above 1.3300 mark

• GBP/USD attracted some dip-buying on Wednesday and reversed the early dip to the fresh YTD low.
• A positive risk tone prompted some profit-taking around the safe-haven USD and extended support.
• Geopolitical risk acted as a tailwind for the buck and kept a lid on any meaningful gains for the major.

The GBP/USD pair reversed the early European session slide to the fresh YTD low and was last seen trading in neutral territory, just above the 1.3300 round-figure mark.

As investors assess the impact of aggressive sanctions against Russia over its invasion of Ukraine, a goodish recovery in the equity markets undermined traditional safe-haven assets on Wednesday. This, in turn, forced the US dollar to pare its intraday gains to the highest level since June 2020 and assisted the GBP/USD pair to attract some buying near the 1.3270 region.

Apart from this, diminishing odds for a 50 bps Fed rate hike move in March acted as a headwind for the greenback. The recent geopolitical developments now seem to have convinced investors that the Fed would refrain from opting for a more aggressive policy stance to combat stubbornly high inflation. That said, rebounding US Treasury bond yields extended some support to the buck.

This, along with the worsening situation in Ukraine, continued boosting the greenback's status as the global reserve currency and kept a lid on any meaningful upside for the GBP/USD pair. In the latest geopolitical developments, reports indicated that Russia has intensified the bombardment of Ukrainian cities and a large Russian convoy was approaching the capital Kyiv.

Moreover, the Ukrainian foreign minister said that it was not clear when the second round of talks with Russia would take place. Adding to this, a spokesperson for the German economy minister noted that they have prepared three more sanction packages against Russia. Hence, the market focus will remain glued to fresh headlines surrounding the Russia-Ukraine saga.

In the meantime, traders on Wednesday might take cues from the US ADP report on private-sector employment. Later during the US session, Fed Chair Jerome Powell will testify before the House Financial Services Committee and provide some impetus to the GBP/USD pair. Any immediate market reaction, however, is more likely to be overshadowed by geopolitical headlines.

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