GBP/USD eases from one-week tops, still well bid around 1.2875-80 region

• Brexit optimism prompted some short-covering move around GBP/USD on Monday.
• BoE’s Ramsden downplayed negative rates talks and provided an additional boost.
• The risk-on mood, political uncertainty weighed on the USD and remained supportive.

The GBP/USD pair surged past the 1.2900 mark and shot to one-week tops during the mid-European session, albeit quickly retreated few pips thereafter.

Having shown some resilience below the very important 200-day SMA, the pair witnessed some aggressive short-covering move on Monday and was supported by a combination of factors. The British pound was supported by the latest optimism that a Brexit deal can be reached.

The UK and European Union are set to resume the ninth and the final round of Brexit talks on Tuesday. Reports indicate that negotiators will begin the process to finalise a deal by the end of this week to hammer out an accord in time for the next EU summit in mid-October.

The sterling got an additional boost after the Bank of England (BoE) policymaker, Dave Ramsden, downplayed the possibility of negative interest rates in the short-term. Ramsden affirmed that he still sees the effective lower bound in the bank rate at 0.10%.

On the other hand, a combination of factors prompted some long-unwinding trade around the US dollar. This, in turn, further fueled the GBP/USD pair strong intraday positive move, which took along some short-term trading stops placed near the 1.2865 region.

Investors remain worried that the lack of additional fiscal stimulus measures could halt the current US economic recovery. Apart from this, the political uncertainty in the run-up to the US Presidential elections in November took its toll on the greenback.

Hence, the key focus will be on the first presidential debate, scheduled on Tuesday. This, along with important US macro data, including the closely watched monthly jobs report (NFP), will influence the near-term USD price dynamics and provide some impetus to the GBP/USD pair.

Technical levels to watch