The Pound declined against the Euro on Monday but remained close to a one-month high, while edging up against a weaker Dollar.

The greenback softened slightly but stayed near its highest point in nearly two weeks as investors anticipated the upcoming US jobs report at the end of this week. 

Meanwhile, British factories experienced their best month in over two years in August, driven by strong domestic demand that counterbalanced a decline in exports, according to a survey released on Monday.

The Pound has been bolstered by improving economic data and the cautious remarks made by Bank of England (BoE) Governor Andrew Bailey last week concerning further rate cuts, Reuters reports.

The Euro increased by 0.18% against the Pound, reaching 84.26 pence per Euro, after hitting 83.98 pence on Friday, its lowest level since 25th July. Whereas Sterling edged up slightly against the Dollar to $1.3132.

Furthermore, analysts noted that over the past eight months, Britain has experienced a stronger growth outlook, with the economy emerging from a shallow recession. This period also saw the introduction of a new government committed to fiscal sustainability, and the Bank of England's Monetary Policy Committee (MPC) starting to ease its restrictive policies.

That said, they have differing opinions on the UK rate outlook.

“Our economists expect one more 25 basis point cut from the BoE this year at the November MPC meeting,” stated Emmanouil Karimalis, a UBS rate strategist.

“However, a cut in September should not be entirely ruled out, as data have improved since the August MPC, and the Fed is poised to cut rates for the first time in this cycle,” he went on to say.

This month’s MPC meeting is set for 21st September, just one day after the Federal Reserve's rate decision.

“(Finance minister) Rachel Reeves' commitment to demonstrating fiscal sustainability has been seen constructively by markets, though inasmuch as union wage costs have accelerated and utility bills are rising once more,” according to Mark Dowding, BlueBay CIO, RBC BlueBay Asset Management.

“Rising inflation creates a difficult backdrop for the Bank of England to reduce interest rates much over the months ahead,” he continued.