Sterling edged higher on Tuesday, taking some encouragement from rallying risk markets as traders confronted mounting anxieties over the inability of EU and UK trade negotiators to break the impasse in Brexit talks.
Analyst at ING encapsulated market sentiment, saying they expected a Brexit agreement and that there was time to do one until mid-November, but the risk of no deal was uncomfortably high nS8N2GJ05I.
GBP/USD bullish sentiment is holding up relatively well, with cable within 110 pips of its recent trend high by 1.3083.
The risk of a no-deal event is keeping negative-rates speculation alive, with a chaotic break potentially forcing 0#FSS: the BoE into enhanced accommodation nL8N2HB2TX.
The pound finds support by 1.2860, its Oct.
16 low, and then more significant support at 1.2845, the 100-DMA, which has trailed GBP/USD from its late September low by 1.2676.
Recent GBP/USD weakness may hint that, as ING noted, a "wafer-thin" agreement may be the best that can be expected and GBP/USD may be capped by its Sept. 1 high at 1.3481 and December's 1.3516 post-election high.
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