On Monday, the Pound is gaining strength against the US dollar as well as the Euro over rising hopes for Britain and the EU to work out a post-Brexit trade deal after both sides agreed to extend discussions past the Sunday deadline. At the time of writing, GBP/USD is trading around 1.332.

Last week, UK PM Boris Johnson and European Commission President Ursula von der Leyen had confirmed that Sunday would be the last day by when both team of negotiators will have to work out a deal, raising fears of a possible no-deal Brexit scenario if differences failed to be worked out by then. However, on Sunday, both leaders came to an agreement to allow talks to extend for longer.

Authorities have confirmed that negotiations on the trade deal are making progress, supporting the GBP/USD which has been trading extremely volatile over the past few sessions. Earlier in December, GBP strengthened by as much as 18% to touch a two and a half year high, and the latest extension has traders hopeful that both sides are keen to work out a deal.

However, markets are also cautious about placing trades in the GBP over worries that a disappointing deal could turn the currency extremely bearish and send GBP/USD crashing down as well. A deal that does not meet expectations can stem the present optimism and drive a sharp sell-off in the Pound.