The British pound rose to a near two-year high against the dollar on Thursday (Dec. 24) as London and Brussels finally reached a long-awaited post-Brexit trade deal.
The currency climbed more than 0.8percent to come within a whisker of the 2020 peak of $1.3624, extending its upward momentum to levels not seen since May of 2018. The British currency was also up 0.6% on the euro, reaching €1.1151.
The British pound had seen plenty of volatility in recent weeks. The deal ends months of difficult and often acrimonious negotiations following Brexit on January 31st and comes days ahead of the end of the transition period on December 31st.
The agreement includes zero tariffs and quotas, a five-and-a-half-year transitional period on fish quotas and maintains fair competition with the UK, in line with EU standards but it does not cover the nation’s much larger and influential finance sector. And, Brussels has made no decision yet on whether to grant Britain access to the bloc’s financial market. The UK Parliament will now vote on the deal on December 30th and it is expected to pass with ease. The European Parliament will hold a ballot on the agreement in January.
European Parliament President David Sassoli said that while he welcomed the deal, "the last-minute nature of the agreement does not allow for proper parliamentary scrutiny by the European Parliament before the end of the year".
UK Prime Minister Boris Johnson said the agreement was a "good deal" for the "whole of Europe" -- one that signified "a new stability and a new certainty in what has sometimes been a fractious and difficult relationship."
Britain published the text of its trade agreement with the EU on Saturday (Dec. 27). The document, consisting of 1,246 pages, also contains details regarding the future relationship on nuclear energy law enforcement and dispute settlement, as well as a series of joint declarations.
The breakthrough averts a much-feared "no-deal" scenario, that would have risked major disruption to the flow of goods. The deal is a deal but economists expect both economies, already weakened by the Covid, to take a hit as supply chains are disrupted and costs mount.