Investing.com - The pound surged on Wednesday following reports that Germany and the UK are set to drop key Brexit demands, while the dollar retreated from near one-and-a-half week highs on gains in sterling.
GBP/USD hit a high of 1.2983 and was at 1.2962 by 09:54 AM ET (13:54 GMT), up 0.83% for the day.
Sterling jumped after Bloomberg reported that both the British and German governments have abandoned key Brexit demands, which investors hope could ease path to a Brexit deal.
The euro fell to the day’s lows following the report, with EUR/GBP down 0.49% to 0.8966.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.29% to 95.09, pressured lower by gains in sterling.
The dollar’s losses were held in check by the risk-off mood in markets amid fears over the impact on global growth from the Trump administration’s protectionist trade policies and strains in emerging markets.
U.S. President Donald Trump could slap tariffs on an additional $200 billion worth of imports from China as soon as Thursday, which would ratchet up the trade row with Beijing.
Data overnight showed that business activity in China slowed in August, indicating that the trade dispute with the U.S. is hitting demand.
Trade talks between the U.S. and Canada were due to resume on Wednesday, with Trump threatening to leave Canada out of a new deal already negotiated with Mexico.
The dollar was higher against the yen, with USD/JPY rising 0.27% to 111.74.
The euro rose to the day’s highs against the dollar, with EUR/USD climbing 0.37% to 1.1625.