GBP/USD's rally stalls in the open as weekend headlines highlight Brexit deadlock

• GBP/USD a touch softer in the open with weekend Brexit headlines capping the pair's advance. 
• US and China trade talks have gained some traction in a phase 1 deal.

GBP/USD is a touch softer in the open on Monday, starting off the week in the consolidation of Friday's upside extension to the highest levels since mid-summer. Cable is trading at 1.2635 and EUR/GBP trades at the lowest levels since May at 0.8726 at the time of writing. Brexit continues to dominate and the last few sessions have seen some positive headway towards a deal as the clock ticks down into the eleventh hour. 

The GBP sailed as markets remained optimistic on the prospects of a deal being agreed on by the UK and EU, although the weekend headlines remind us that the road to a ‘soft’ Brexit remains long, with the European Commission today saying that there is a lot of work that remains to be done  - PM Johnson echoed the same as he continues to steer the UK towards leaving on the 31st of this month. Talks will continue today as the clocks tick down to the EU summit with European Union negotiators warning that the PM's plans are still not yet good enough to be the basis for an agreement.

Trade talks between the US and China finding traction

Elsewhere, the focus has been on trade talks between the US and China. The nations completed 'phase one' of a bigger trade deal on Friday, with subsequent announcements rolling in just ahead of the Wall Street close supporting a risk-on finish to the week.  However, Chinese media have warned not to be 'overly optimistic' about the prospects for future negotiations and considering the significant hurdles for which will need to be overcome should a more comprehensive deal finally be agreed. 

Heads turn to UK jobs data this week

Looking ahead, US retail sales will come into focus as well as UK Labout market data. "August may see one of the final gasps of strength for the labour market, as we look for the u-rate to fall to a new multi-decade low of 3.7%. However, we do look for the strength in job growth to slow in the coming months; the one consistent message from all three UK PMIs for September was that employment has started contracting across all sectors of the economy," analysts at TD Securities explained. 

GBP/USD levels

Valeria Bednarik, the Chief analyst at FXStret, argued that the GBP/USD pair is firmly bullish with the price being well above its 20 and 100 DMA, while technical indicators maintain their bullish slopes, heading north pretty much vertically. "Shorter-term, and according to the 4 hours chart, technical indicators have lost bullish strength but remains at extreme overbought levels, as the pair settled over 300 pips above all of its moving averages, all of which reflects the strength of bulls."