CAIRO: A temporary ceasefire is holding in the Palestinian Gaza Strip as Egyptian mediators pursue talks with Israeli and Palestinian representatives on a long-lasting end to the war that has devastated the Palestinian territory.

Egyptian intelligence officials met in Cairo with a high-level Israeli delegation late on Tuesday, a day after conferring with Palestinians who included envoys from Hamas and the Islamic Jihad group, Egyptian officials said on Wednesday.

“The indirect talks between the Palestinians and Israelis are moving forward,” one Egyptian official said, making clear that the opposing sides were not meeting face to face.

“It is still too early to talk about outcomes but we are optimistic.”

Egyptian and Palestinian sources said further discussions were expected to be held in Cairo on Wednesday, with expectations of an initial. response by Israel to Palestinian demands, which it has so far shown no sign of accepting

Meanwhile international Middle East peace envoy Tony Blair and UN Middle East peace process coordinator Robert Serry held talks with Egyptian officials on Wednesday.

Israel withdrew ground forces from the Gaza Strip on Tuesday morning and a 72-hour Egyptian-brokered ceasefire with Hamas went into effect as a first step towards a longer-term deal.

In Gaza, where about a half-million people have been displaced by a month of bloodshed, some residents left UN shelters to trek back to neighbourhoods where whole blocks have been destroyed by Israeli shelling and the smell of decomposing bodies fills the air.

Streets in towns in southern Israel, which had been under daily rocket fire from the Gaza Strip, were filled again with playing children.

Palestinians want an end to the Israeli-Egyptian blockade on impoverished Gaza and the release of prisoners, including those Israel arrested in a June crackdown in the occupied West Bank after three young settlers were kidnapped and killed.Israel has resisted those demands.