The Pound continues to hold firm

After a flat week in the market, we could see some volatility once again this week as Brexit talks resume and we see further economic recovery news. Negotiations continue tomorrow in Brussels and whilst no major breakthrough is expected, the market will want confirmation talks remain supportive of a deal.

Last week Chief Negotiator David Frost said an agreement can be reached in September. If there is any news of progress and/or hints of an agreement, the Pound will rally 1-2%. For now, confidence in the Pound remains and the charts suggest Sterling will continue to consolidate its position across the board this week.

The fact that £-€ & £-$ continue to trade 'comfortably' above key resistance levels of 1.10 & 1.30 mid-market, means there is optimism around Brexit and a swift economic recovery in the UK. Both Goldman Sachs & Morgan Stanley have recently reduced their negative outlook on the Pound, along with the majority of other investment banks and data-houses.                                 

As we mentioned at the start of the month, August is a bit of a 'free-shot' for the Pound, as come September Brexit talks get ramped up, the BoE policy meetings come into play again and children are expected to go back to school. The latter is important to note, as not only will it give a sense of normality again in our lives (however contentious), but it will aid dramatically in the UK's recovery. Education contributes a huge amount to GDP and parents need their children to be in school so they can return to work, again further helping the economy. 

PMI Friday is the main economic event of the week, which will give us a sense of how the recoveries are progressing. The numbers from the EU, UK & US are expected to rise again for the month of August as countries continued to ease Covid restrictions. Any surprises in the results will move the £.

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