Sterling close to 2-½ yr highs as UK and EU clinch Brexit breakthrough

LONDON — The British pound traded near 2-½ year highs on Thursday as investors reacted to the U.K. and the European Union striking a long-awaited Brexit trade deal.

Sterling trimmed some gains after the news was announced, but was still up 0.5% for the session at around $1.3557. Earlier this month, the currency breached a 2020 high of $1.3624, a level it hasn’t hit since May 2018.

Brexit negotiators struck a free trade agreement on Thursday after months of tense political wrangling over a number of key sticking points.

The confirmation of the deal wrapped up an extensive period of tense negotiations over the future trading relationship between Britain and the EU. Both sides have been at odds over a number of key issues, not least fisheries. The EU wanted to maintain access to U.K. waters for its fishing fleets, while the U.K. wanted to largely curb these fishing rights.

Looking ahead to next year, Berenberg’s Senior Economist Kallum Pickering said a deal would offer support for the pound.

“By removing a major downside risk to the U.K. economy both in the near-term and long-term, a deal would unlock significant investment in U.K. and support the recovery once the ongoing coronavirus shock starts to fade, as well as provide a positive backdrop for U.K. equities and Sterling heading into 2021,” he said in a note Thursday.

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