Sterling holds up against stronger dollar, supported by Brexit hopes

* Graphic: World FX rates in 2020

* Graphic: Trade-weighted sterling since Brexit vote

LONDON, Oct 7 (Reuters) – Sterling edged higher on Wednesday against both the euro and the dollar, after reports that Brexit talks between Britain and the European Union have progressed.

The pound held on against a stronger dollar after U.S. President Donald Trump abruptly cancelled talks on economic stimulus with Democrat lawmakers, boosting demand for the safe-haven currency.

Sterling was up 0.5% in early trade at $1.2929 against the dollar, not far from the almost three-week high of $1.3007 it touched on Tuesday. It was up 0.16% at 91.99 pence against the euro.

Investors were upbeat on sterling after Reuters reported that Britain and the European Union were moving “closer and closer to a deal”.

“It is all about the UK-EU trade negotiations headline news,” wrote ING analysts in a note to clients.

Optimism that Britain and the EU could reach an agreement on their future trade relationships has been growing this week, with most analysts expecting the two parts to reach at least a “skinny” deal before the Brexit transition ends in December.

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