WATCH: UK and EU on brink of historic Brexit deal
The pound was trading at a two-year high on Thursday, as the UK and European Union (EU) sealed the deal on an historic free-trade agreement.
UK prime minister Boris Johnson and European Commission president Ursula von der Leyen confirmed the deal had been signed off, four years after Britain voted to leave the EU and days from the end of its transition.
“We have taken back control of our laws and our destiny. We have taken back control of every jot and tittle of our regulation in a way that is complete and unfettered,” said Johnson.
The pound had been trading higher all day amid widespread reports the deal was imminent, despite last-minute haggling over fishing quotas that delayed an announcement expected earlier on Thursday. It lost some steam after the deal was confirmed amid apparent investor caution, however.
Officials had continued to thrash out the final details and draft of the UK’s divorce throughout the day, after negotiations had ploughed on through the early hours in Brussels overnight.
WATCH: Boris Johnson speaks to the nation after Brexit deal
A deal had been expected to be unveiled at press conferences on Thursday morning by UK prime minister Boris Johnson and European Commission president Ursula von der Leyen after a final phone call.
But Irish foreign affairs minister Simon Coveney said there appeared to be “some sort of last-minute hitch” in the talks. Final work on fishing quotas was reported to have caused delays.
Sterling rose as much as 0.8% against the dollar (GBPUSD=X) at $1.36, but faded after the deal was confirmed as investors weighed up Johnson’s and von der Leyen’s comments.
It was up around 0.3% in late afternoon trading in London against both the dollar and the euro, close to €1.11 (GBPEUR=X).
Investors welcomed the news severe economic damage and disruption from a no-deal Brexit has likely been avoided once the transition period expires on 31 December. The agreement is likely to prevent tariffs and quotas being imposed on trade worth around £294bn to British exporters and £374bn to EU exporters.
But a deal had largely been factored in by investors for much of the year, and the pound’s lost momentum suggests uncertainty and some fears over the exact nature of the agreement. The final text is yet to be published, but is believed to run to around 500 pages that will have wide-ranging implications for the future of the UK economy.
Some of the new barriers and the compromises made by both sides are likely to emerge only in the coming days in the small print of the text.
The end of the transition will still mean other new barriers to cross-border flows of goods, services and people between Britain and its biggest trade partner. UK firms and workers face new paperwork and checks for exported goods or services provided in the bloc. The deal also still needs to signed off by lawmakers,
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