**GBP/USD Climbs Closer to Mid-1.3400s as Trade Optimism Undermines the Safe-Haven USD**
*Article adapted and expanded from the original by FXStreet News, credit to the original author.*
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The British pound extended its rally against the US dollar during Tuesday’s Asian session, pushing the GBP/USD pair closer to the mid-1.3400s. This upward move marked the third consecutive session of gains for sterling, as renewed optimism around global trade relations encouraged risk-on flows and undermined demand for the safe-haven greenback.
### A Shift in Market Sentiment
Recent developments in US-China trade negotiations have softened investor concerns over global economic growth. News emerged suggesting both sides were making progress on several sticking points, raising hopes for a partial resolution. Supportive comments from officials on both sides helped ease fears of an imminent escalation in trade tensions.
Key factors driving this renewed optimism include:
– Reports indicating that officials from the United States and China maintained regular communication and were continuing to fine-tune the text of a potential trade agreement.
– Hints from the US administration about possible tariff rollbacks if a deal is reached and maintained.
– China’s indication that it could increase purchases of US agricultural products.
Such progress has supported risk assets globally. Equity markets in Asia and Europe opened higher, while risk-sensitive currencies such as the British pound and the Australian dollar advanced.
### Safe-Haven Demand for US Dollar Eases
The improvement in global risk sentiment has led to diminished demand for traditional safe-haven assets, including the US dollar and US Treasuries. Investors are increasingly willing to take on more risk, which puts pressure on the dollar as money flows into higher-yielding or riskier assets.
Key points regarding the US dollar’s weakness include:
– The US Dollar Index, which measures the currency against a basket of six peers, retreated after recent gains.
– Broad-based selling of the dollar was observed in favor of riskier assets, as traders moved funds into equities and other high-beta currencies.
– Lingering uncertainty about the Federal Reserve’s next policy move has kept the dollar under additional pressure.
### Brexit and the British Pound
While global developments have weighed the most on near-term currency flows, Brexit uncertainty continues to hover over the pound. The Conservative government’s renewed campaign to get its Withdrawal Agreement passed by Parliament represents an ongoing source of volatility for GBP/USD.
Updates on this front include:
– The UK government reiterated its intention to secure Brexit by seeking parliamentary approval for its deal, with hopes to avoid a disruptive ‘no-deal’ exit.
– Market participants remain cautious, as any stalling or new obstacles could reverse the pound’s recent gains swiftly.
– Cross-Party discussions in Westminster and public statements from policymakers are closely watched for signs of compromise or renewed stalemate.
Despite these lingering concerns, the pound has thus far been buoyed primarily by global market factors rather than domestic politics. Sterling’s move higher is largely the result of the shift in international risk appetite and relief from trade-related uncertainties.
### UK and US Economic Data: A Mixed Picture
Macroeconomic releases from both economies remain in focus, with investors scrutinizing the latest indicators for any signals concerning future policy and economic trends.
#### Recent UK Data
– Last week’s UK GDP figures showed better-than-expected monthly growth, which helped underpin the pound.
– Other data, like retail sales and manufacturing output, have painted a mixed portrait with lingering signs of weakness.
– The labor market remains relatively robust, managing to support household incomes and consumer spending.
#### Recent US Data
– Recent non-farm payrolls data suggested a resilient US labor market, but wage growth numbers fell short of expectations.
– Inflation has remained subdued, keeping pressure on the Federal Reserve to consider easing policies in the future.
– The ISM manufacturing index, a key bellwether of US industrial activity, recently printed a weak reading, fanning concerns about the impact of ongoing trade uncertainty on the
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