The Pound continues to climb but tricky month ahead

The Pound begins September on the front-foot with £-€ rates hitting an 11-week high and £-$ rates trading at a 9-month high. Both currency pairs proving favourable to anyone with exchanges in the pipeline, especially with what's ahead for Sterling. 

£-€ rates are currently up 1% in a week (which should not be sniffed at), but more impressively, £-$ rates are up a huge 2.5% over the same time period. The gains come amidst a number of ongoing situations all that are in the Pounds favour. The sell-off in the USD, performance of global stock markets, UK's economic recovery and no near-term plan for the BoE to move into negative interest rates.

However, the Pound will be subject to a downturn if any of the above stutters and/or there is negative Brexit trade talk news. Chief negotiators Barnier & Frost are holding emergency talks this week, ahead of a formal round of negotiations next week.

The Sunday Times reported this weekend that PM Johnson has instructed David Frost to end the negotiations if the EU does not drop demands that the UK will follow EU rules concerning state aid. The Times has reported today that the EU is refusing to discuss UK proposals on a future fisheries treaty. 

Another possible hindrance to the Pounds near-term future is the leaked idea that the treasury will be raising taxes. Whilst the fiscal support was essential to protect the economy, it will come at a cost. Estimates of how much the package has cost lies between £65bn-£120bn. The new tax proposals would raise around £20bn per annum, but international businesses and investors will question the UK's attractiveness if taxes like corporation tax do rise.

There is plenty of economic data due out this week, so we can expect a volatile week ahead. PMI Thursday is the main attraction and the UK will be hoping to continue its fine recovery. There are BoE speeches either side of the announcements that the market will be watching closely. Elsewhere, Euro-Zone retail sales figures and the US' unemployment rate will be key.

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