GBP/USD rallies back to 1.3000 mark, focus remains on Brexit headlines

• GBP/USD witnessed some aggressive short-covering move on Monday amid renewed Brexit optimism.
• The risk-on mood undermined the safe-haven USD and remained supportive of the strong move up.
• Monday’s key focus will be on the Barnier- Frost meeting and the Fed Chair Jerome Powell’s speech.

The GBP/USD pair continued scaling higher through the first half of the European trading session, with bulls now looking to build on the momentum beyond the key 1.3000 psychological mark.

The British pound turned out to be the top-performing currency on the first day of a new week and was supported by the UK Brexit minister, Michale Gove's optimistic remarks. In a weekend BBC interview, Gove said that the door is “still ajar” for post-Brexit talks to continue with the European Union if officials in the bloc change their position on key points.

This comes on the back of the UK PM Boris Johnson's comments on Friday, saying that Britain needs to prepare for an 'Australia style' Brexit. It is worth recalling that negotiations between the UK and the EU have stalled amid disagreements over fishing access and competition issues. Gove's remarks, however, offered a glimmer of hope and prompted some aggressive short-covering around the sterling.

On the other hand, the prevalent risk-on mood dented the US dollar's relative safe-haven status and remained supportive of the strong bid tone surrounding the GBP/USD pair. The global risk sentiment got a strong lift in the wake of reviving hopes for additional US fiscal stimulus measures and expectations of a vaccine for the highly contagious coronavirus diseases by the end of this year.

In the absence of any major market-moving economic releases, either from the UK or the US, the incoming Brexit-related headlines will continue to drive the sentiment surrounding the British pound. Hence, the key focus will be on a meeting between the EU's chief negotiator Michel Barnier and his UK counterpart, David Frost.

Later during the early North American session, a scheduled speech by the Fed Chair Jerome Powell might influence the USD price dynamics and further assist traders to grab some meaningful opportunities.

Technical levels to watch