GBP/USD sticks to modest recovery gains below mid-1.3000s, lacks bullish conviction

• GBP/USD staged modest recovery from the 1.3000 mark, or the lowest level since November 2020.
• The emergence of some USD selling, upbeat UK jobs data remained supportive of the positive move.
• The Ukraine crisis held back bulls from placing aggressive bets ahead of the FOMC/BoE meetings.

The GBP/USD pair held on to its modest intraday gains through the early European session and was last seen trading near the daily high, just below mid-1.3000s.

The pair continued showing some resilience and attracted some buying near the 1.3000 mark on Tuesday, snapping three successive days of the losing streak to the lowest level since November 2020. The uptick was sponsored by the emergence of some US dollar selling and was further supported by better-than-expected UK monthly employment details.

In fact, the UK Office for National Statistics (ONS) reported that the jobless rate fell to 3.9% in January as against a dip to 4.0% anticipated from the 4.1% in the previous month. Adding to this, the number of people claiming unemployment-related benefits fell by 48.1K in February when compared to -31.9K booked previously.

The data reaffirmed market expectations that the Bank of England will hike interest rates at its upcoming meeting on Thursday and underpinned the British pound. The GBP/USD pair, however, lacked bullish conviction as the market sentiment remains fragile amid the risk of a further escalation in the Russia-Ukraine conflict.

Apart from the geopolitical risks, growing acceptance about an imminent start of the policy tightening cycle by the Fed and the recent surge in the US Treasury bond yields should benefit the buck. This, in turn, warrants some caution for aggressive bullish traders and before positioning for any further appreciating move for the GBP/USD pair.

Investors might also prefer to wait on the sidelines heading into the key central bank event risks. The Fed is scheduled to announce the outcome of a two-day policy meeting on Wednesday, which will be followed by the BoE decision on Thursday. This will play a key role in determining the next leg of a directional move for the GBP/USD pair.

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