Last week Sterling fell to multi-month lows against both the US Dollar and the Euro as Brexit negotiations soured following the wording of the proposed UK Internal Market Bill being released. If passed this will breach the Withdrawal Agreement and break international law. As a result, we saw tensions between the UK and EU intensify. The EU commission stated that the emergency meeting of the UK-EU joint committee had not cleared EU concerns over the Internal Market Bill. It rejected the UK contention that it would protect the Northern Ireland peace agreement and called for measures to be withdrawn by the end of September at the latest, and legal action has been threatened. There was confirmation that the talks would continue this week which provided an element of relief. Meanwhile, the big market event of the week was the ECB meeting. In the week prior, there was concern and speculation over the current strength of the single currency, prompting the currency to weaken in the period leading up to the meeting. The ECB made no changes to interest rates at the policy meeting and there were also no changes to the quantitative easing programme with bond purchases continuing under the PEPP scheme. The forward guidance was unchanged with bond purchases set to continue until at least June 2021 and interest rates remaining extremely low. The economic assessment was slightly more optimistic from ECB President Lagarde. She noted that the deflation risks had declined slightly since June despite the very

Last week, the Euro pushed to the highest level seen against the US dollar since 2018 following the agreement between the EU 27 member states on how the Recovery Fund will operate. Leaders of 27 European Union countries reached a unanimous agreement on 750 billion euros ($860 billion) in coronavirus recovery funds, divided into grants worth 390 billion euros and low-interest loans worth 360 billion euros. It was the breakdown that took time to agree. It was vital that this was passed as the funds will be raised by the EU Commission using its AAA rating while there will be changes to EU rebates. The AAA rating means they will be able to borrow cheaper as a collective rather than individual countries; for example, Greece’s S&P rating is BB-, this is 9 notches lower than AAA. As a result, EURUSD has pushed circa 4.5% higher from the low of the month. In the meantime, sterling benefited against the US dollar as a result of the move on EURUSD but subsequently moved lower against the single currency. GBPUSD is now trading at its highest level since March against the US dollar despite ongoing uncertainty about the progress in talks between the EU and the UK on their future relationship. Economic data also helped pushed the currency higher as retail sales, service and manufacturing data all improved. The US dollar was on the back foot as concerns about deteriorating relations with China and that the US economic rebound is faltering prompted