GBP/USD keeps the red below 1.3400 mark, focus remains on Russia-Ukraine conflict

• GBP/USD edged lower on Thursday and eroded a part of the overnight strong recovery gains.
• Geopolitical risks continued underpinning the safe-haven USD and exerted downward pressure.
• The market focus will remain glued to fresh developments surrounding the Russia-Ukraine saga.

The GBP/USD pair remained on the defensive through the early part of the European session and was last seen trading near the daily low, around the 1.3380 region.

The pair struggled to capitalize on the previous day's solid rebound of over 130 pips from the 1.3270 area, or the fresh YTD low and edged lower on Thursday amid modest US dollar strength. Concerns about the economic impact of Russia's invasion of Ukraine continued underpinning the greenback's safe-haven status and acted as a headwind for the GBP/USD pair.

In fact, reports indicate that Russia has intensified the bombardment of Ukrainian cities and Russian forces have captured the Black Sea port of Kherson. That said, hopes of ceasefire talks between Russia and Ukraine capped gains for the USD. Apart from this, diminishing odds for a 50 bps Fed rate hike in March should help limit losses for the GBP/USD pair.

The recent geopolitical developments now seem to have convinced investors that the Fed would refrain from opting for a more aggressive policy response to combat stubbornly high inflation. This was evident from the overnight muted market reaction to Fed Chair Jerome Powell's comments, saying that the central bank could take tougher action if inflation levels do not come down.

Market participants now look forward to the release of the final UK Services PMI for some impetus ahead of the usual Weekly Initial Jobless Claims data from the US. Traders might further take cues from Fed Chair Jerome Powell's second day of testimony before the Senate Banking Committee. The focus, however, will remain glued to headlines surrounding the Russia-Ukraine saga.

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