- GBP/USD gained some positive traction on Wednesday and moved away from the YTD low.
- A positive risk tone undermined the safe-haven USD and extended some support to the pair.
- Stagflation fears, Ukraine crisis should limit the USD losses and cap the upside for the major.
The GBP/USD pair traded with a mild positive bias through the early European session and was last seen hovering near the daily high, around the 1.3135 region.
Having shown some resilience below the 1.3100 mark, the GBP/USD pair gained some positive traction on Wednesday and moved away from the lowest level since November 2020 touched in the previous day. A generally positive tone around the equity markets undermined the safe-haven US dollar and was seen as a key factor that extended some support to the major.
The risk sentiment stabilized in reaction to old headlines that Ukraine is not insisting to join NATO. Adding to this, the announcement of a meeting between Russian and Ukrainian foreign ministers in Turkey on Thursday helped ease the market jitters. This, in turn, boosted investors' confidence and drove flows away from traditional safe-haven assets.
That said, the risk of a further escalation in the tensions between Russian and Western powers should keep a lid on any optimistic moves in the markets. In fact, US President Joe Biden on Tuesday imposed an immediate ban on Russian oil and other energy imports. Moreover, Britain announced that it would phase out the import of Russian oil by the end of 2022.
The Russian foreign ministry reportedly said on Wednesday that the response to the Western sanctions will be sensitive and precise. Moreover, concerns about the rapidly deteriorating global economic outlook should act as a tailwind for the greenback and cap the upside for the GBP/USD pair. This, in turn, warrants some caution for aggressive bullish traders.
Market participants now look forward to the US economic docket, highlighting the release of JOLTS Job Openings later during the early North American session. The data might do little to influence the USD or provide any impetus to the GBP/USD pair as the market focus remains glued firmly on any further developments surrounding the Russia-Ukraine saga.