GBP/USD steadily moves closer to 1.3200, focus remains on geopolitics ahead of US CPI

• GBP/USD turned positive for the second successive day amid subdued USD demand.
• The risk-on impulse was seen as a key factor that weighed on the safe-haven buck.
• Traders eye US CPI for a fresh impetus amid hopes for the Russia-Ukraine ceasefire.

The GBP/USD pair climbed to a three-day peak during the early European session, with bulls eyeing a move towards reclaiming the 1.3200 round-figure mark.

The pair attracted some dip-buying near the 1.3140 region on Thursday and might now be looking to build on its recovery from the lowest level since November 2020 touched earlier this week. Hopes for a diplomatic solution to end the war in Ukraine remained supportive of the risk-on mood. This, in turn, undermined the safe-haven US dollar and extended some support to the GBP/USD pair.

In fact, Russian Foreign Minister Sergey Lavrov and his Ukrainian counterpart Dmytro Kuleba have arrived in Turkey for talks – the first between the two officials since Russia's invasion of Ukraine. The latest development has raised hopes for a compromise to resolve the conflict and much-needed relief to investors. This was evident from a generally positive tone around the equity markets.

That said, the risk of a further escalation in tensions between Russian and Western powers could keep a lid on the optimistic move in the markets. Investors also remain concerned about a major inflationary shock and the rapidly deteriorating global economic outlook. This should act as a tailwind for the greenback and cap gains for the GBP/USD pair ahead of the latest US consumer inflation figures.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has formed a near-term base and positioning for any further appreciating move. Nevertheless, the pair, so far, has managed to hold in the positive territory for the second successive day and remains at the mercy of the USD price dynamics amid absent relevant economic releases from the UK.

Technical levels to watch