Insights 
VT 
The UK is set to release important economic data, including Gross Domestic Product (GDP) and Industrial Production figures for August. GDP is expected to see a 0.1% monthly increase, and Industrial Production might rise by 0.2%, despite an annual decline of 0.6%.
GBP/USD has seen gains, reaching 1.3400 on Wednesday, recovering from a dip to 1.3290. Economic releases from the UK, alongside tensions between the US and China, could influence this trend.
Easing Tensions Aid the Pound
The easing of China-US tensions has aided the Pound, with GBP/USD trading at 1.3396. US Treasury Secretary Scott Bessent’s proposal for reduced tariffs on Chinese goods might lead to future negotiations.
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We are watching the upcoming UK Gross Domestic Product figures for August very closely. The market expects a slight 0.1% expansion, and any deviation from this could cause significant volatility in the Pound. Given the UK’s flatlining GDP throughout much of 2024, which saw the economy narrowly avoid recession with 0.2% growth in the second quarter, even a minor beat would be seen as a strong positive signal.
For now, GBP/USD is trading near the 1.3400 handle, a psychologically important level. We see this as a pivot point for the coming weeks, especially after the pair recently found support at its 200-day moving average. Traders should consider using options to position for a breakout, as a stronger-than-expected GDP reading could push the pair towards 1.3500.
US Government Shutdown Impact
The situation is complicated by the ongoing US government shutdown, which is limiting the release of key American economic data. This creates an information vacuum, making the US Dollar more susceptible to swings based on international news rather than domestic fundamentals. We saw a similar dynamic during the 35-day shutdown in late 2018, which led to erratic price action in major currency pairs.
Adding to this, the hints of a thaw in US-China trade relations could reduce demand for the US Dollar as a safe-haven asset. Comments about a potential pause on tariffs could boost global risk sentiment, benefiting currencies like the Pound Sterling. This reflects a familiar pattern where easing geopolitical tensions often lead to a weaker dollar.
In this environment of fiscal uncertainty, gold remains a critical portfolio hedge. We’ve seen its price remain elevated, building on the record highs it reached in 2024 as central banks continued to be major buyers. Holding derivatives tied to gold is a prudent strategy to protect against potential currency instability.
Even the speculative corners of the market offer clues about trader sentiment. The accumulation of Dogecoin by large holders suggests some market participants are willing to take on more risk. A sustained rebound in such assets would confirm a broader “risk-on” mood, which would likely weigh on the US Dollar.
