In a major and welcome change, the U.S. and China have agreed to suspend their spiraling trade war. This move has sparked an unprecedented rush of optimism in global markets. The revival of trade peace cycle demonstrates that investors seek a measure of respect and dignity in trade relations. In the wake of this announcement, markets went wild, showcasing a sudden burst of confidence from jittery traders.
The ceasefire between the two global superpowers upholds classic investing truths, as investors market observed in 2020. In a recent commentary, it was stated,
“US-China trade truce only emphasizes timeless investing truths.” – www.fxstreet.com
This dramatic turn in sentiment has translated into a visible effect on currency markets, especially the influence on the GBP/USD exchange rate. Following a string of painful setbacks, GBP/USD has started to make some gains, changing hands around 1.3280 in early action on Thursday in Asia. Now that the currency pair is recovering, it’s making its way towards a key level of 1.3300.
The GBP/USD is soaring. This boost comes at the very moment the UK prepares to release its first quarter GDP data. Analysts are already forecasting that this upcoming euro zone data could push currency trends even further on their head. This hope accompanying the GDP report adds upward momentum to GBP/USD. Couple that with the general themes of decoupling, de-risking, and diversification permeating US-China trade relations—this currency pair’s traction is being primed by recent headlines.
The upbeat market reaction spreads way past foreign exchange. Perhaps it is the sign of a more general recovery in investor sentiment, showing positive signs for many sectors. The US-China trade truce is a very strong accelerant. Everyone from Wall Street analysts to Main Street entrepreneurs is hoping that this belt-tightening will lead to long-term economic expansion.