Pound surges higher after UK and EU agree Northern Ireland deal
The pound has jumped higher after Britain and the EU secured a new post-Brexit deal for Northern Ireland in a move set to end long-running tensions following the UK's withdrawal.
Sterling leaped 0.7% higher to 1.20 US dollars and was 0.3% up at 1.14 euros after a Government source said Prime Minister Rishi Sunak and European Commission president Ursula von der Leyen had signed a breakthrough deal at a meeting in Windsor, Berkshire.
The FTSE 100 Index was also trading 0.6% or 50.7 points higher at 7929.4 in afternoon trading on Monday.
The deal is set to finalise Brexit more than six years after the 2016 referendum, and to resolve the trading issues created by the Northern Ireland Protocol.
But there are lingering concerns over the challenge ahead for Mr Sunak, who still has to win the approval of the Democratic Unionist Party (DUP) to ensure powersharing can be restored in Northern Ireland, and amid pressure on the Prime Minister to give MPs a Commons vote.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Dawn may be about to break on a new era of calmer relations between the UK and the European Union, but hopes still aren't racing away that it will herald a significant post-Brexit boost for the economy.
“This new consensual approach should help for other thorny political problems such as migration, but in itself it's unlikely to move the dial much for a big uplift to UK trade immediately.
“There are some lingering concerns about opposition in Parliament, which would have to ratify the deal, but the power of the Conservative rebels has been weakened.”
Walid Koudmani, chief market analyst at XTB, said the EU-UK deal regarding Northern Ireland will end a lengthy period of uncertainty.
But he added that the pound is likely to see heightened volatility until any deal is finally given the all-clear by the DUP and Tory Eurosceptics.
“Any further roadblocks in the process could prove to be quite counterproductive for the moods of investors and could lead to a pullback from current levels which have already acted as a resistance in the past,” he said.