GBP/USD reverses sharply to 1.2850 as Brexit jitters weigh

• Short squeeze fizzles as Brexit blues continue to haunt the GBP markets.
• To remain at the mercy of the Brexit news ahead of the vote of confidence in the UK PM May due Tuesday.

The pound caught a fresh bid-wave in early trades and broke the consolidation phase to the upside, sending the GBP/USD pair to daily tops near 1.2885, before quickly trimming gains to now trade near the midpoint of the 1.28 handle.

GBP futures: upside limited near term

The sudden bounce in the Cable can be mainly seen as a shorts squeeze, as markets seek to lock-in gains after last week’s extensive sell-off and heading into tomorrow’s critical vote of confidence in the UK PM Theresa May’s leadership.

Meanwhile, fresh selling seen in the US dollar amid a risk-on action on the European equities and Goldman Sachs’ 2019 bearish outlook on the greenback also help the spot to gain some upside traction.

However, wide expectations that the PM May’s Brexit deal is likely to be defeated in the House of Commons, capped the recovery attempts in the major.  Further, the increased odds of a no deal Brexit for the UK also continue to keep the bearish pressure intact on the domestic currency.

All eyes remain on the Brexit-related headlines that are likely to create a stir in the fx markets amid a data-empty UK docket while the US calendar also remains relatively sparse.

GBP/USD Technical Levels