Above: U.S. Commerce Secretary Howard Lutnick addresses the media close to midnight London time following the completion of talks with Chinese counterparts. Image: Pound Sterling Live.
The Pound to Dollar exchange rate retreats to 1.3473.
The Dollar is the top-performing G10 currency in the midweek session, buoyed by news of progress between China and the U.S. in unlocking a stalled trade accord.
The U.S. and China have agreed on a framework for implementing the accord they agreed in Geneva back in May, which aims to revive the flow of sensitive goods.
The new framework will see China speed up shipments of rare earth metals and the U.S. ease some of its export controls on sensitive technologies. The latest agreement still requires approval from Donald Trump and Xi Jinping.
"Now we can go forward to try to do positive trade, growing trade," said U.S. Commerce Secretary Howard Lutnick, following talks held with Chinese counterparts in London.
The Geneva accord was welcomed by markets as concrete evidence that the worst of the trade war fears had come to pass, which would offer relief for the Dollar.
However, the accord soon floundered, with both the U.S. and China proving reticent in committing to key aspects of the Geneva accord.
Dollar strength suggests markets see some relief in the news, and the GBP/USD pair extends a short-term retreat to test 1.3473, having been as high as 1.3616 last week.
News of progress between China and the U.S. in the London talks will support investor sentiment and prompt markets to unwind some of the aggressive positioning that has built up against the currency in recent months.
However, there will remain an air of caution over whether progress will be guaranteed, given the false starts of recent times.
"While the mood music has stayed positive, investors may be wary of the pattern that emerged during the previous US-China trade talks in 2018-19, when apparently constructive in-person meetings seemed to take a step back as the negotiating teams returned to their capitals," says Jim Reid, macro strategist at Deutsche Bank.
"So there's perhaps a little disappointment this morning that we haven't yet got a bigger announcement, even though there's time to hear the full conclusions of the meeting," he adds.
Longer-term, the prospects for the Dollar remain challenging, and further GBP/USD upside is still likely as that trend of weakness in the Greenback plays out.
"We continue to expect the USD to depreciate broadly this year, though recognise that this is increasingly becoming a consensus view," says Alex Cohen, FX Strategist at Bank of America.