* Graphic: World FX rates in 2020
* Graphic: Trade-weighted sterling since Brexit vote (Adds latest news and updates prices)By Olga CotagaLONDON, Sept 28 (Reuters) - The British pound rose more than1% on Monday on hopes that Britain could secure a Brexit tradedeal with the European Union by October or at least avoid acliff-edge exit from the bloc.The EU and Britain kicked off a decisive week of talks onMonday but cautioned that a deal was still some way off.A final agreement must be reached by the end of December butboth sides have set a preliminary deadline for next month as itwill take some time to sign off any deal.The pound's gains were fuelled by an EU diplomat saying lastweek that "the mood music was a bit better" after Britain'sBrexit supremo Michael Gove expressed confidence about securinga trade deal. "If discussions this week lead to a break through infisheries and a level playing field then we could hopefully landan agreement by Oct. 15," Kenneth Broux, head of corporate FX atSociete Generale, said.The Bank of England Deputy Governor Dave Ramsden's commentson Monday saying he thought the floor for the central bank's keyinterest rate was 0.1% could also have helped the pound, but hisviews were already known in the media, Broux said. "We have a good starting week for risk assets, we've gotsome cautious optimism on Brexit and we've got month-end andquarter-end so we have to be very mindful of all these factorscoming together," he added.Sterling was trading 1% higher at $1.2863 by 1500GMT, having earlier risen to a one-week high of $1.2930. It wasalso 0.7% higher versus the euro at 90.61 pence, after hitting a20-day peak of 90.26 .
WITHDRAWAL AGREEMENT
Latest CFTC data showed that hedge funds held a small amountof sterling short positions in the week to Sept. 22 . "There's hope that, no matter what, they will avoid theextremes and even if there is no deal, they will make sure thatwe don't get any disruptions in the market," said AthanasiosVamvakidis, global head of G10 FX strategy at BAML.The UK's Internal Market Bill had raised worries thatBritain was on course to override the Withdrawal Agreementsigned last year which protected the border between Ireland andNorthern Ireland, an issue at the heart of last year's Brexitnegotiations."It seems that the UK government ... have indicated thatthey will avoid violating the Withdrawal Agreement so this wasone positive," Vamvakidis said.Gove said Monday the clauses of the Internal Market Billthat undercut the Withdrawal Treaty would remain but the EUindicated it would not leave the negotiating table.As the British government mulls tougher restrictions totackle the swiftly accelerating second wave of the coronavirusoutbreak, the recession induced by the pandemic has marketwatchers questioning whether Britain will cut its interest ratebelow zero. However, for now money markets do not price in aprobability of a rate cut at the next November meeting. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^sterling sept 28 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Olga Cotaga; Editing by Alison Williams, KirstenDonovan)
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