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Pound hits high as Northern Ireland protocol deal is done

pound  Britain's Prime Minister Rishi Sunak and European Commission chief Ursula von der Leyen attend a joint press conference at the Fairmont Hotel in Windsor, west of London on February 27, 2023, following their meeting.
The pound surged after Rishi Sunak and Ursula von der Leyen announced a UK-EU deal on Northern Ireland called the new 'Windsor Framework'. Photo: PA

The pound has rallied after a Brexit deal on Northern Ireland was struck between Britain and the EU.

The sterling is now up 0.7% and closer to $1.21 after prime minister Rishi Sunak confirmed a deal had been reached on what he calls "the new Windsor Framework".

He said it will ensure smooth flowing trade in the UK, protects Northern Ireland's place in Britain and ends uncertainty.

“Today’s agreement delivers the smooth flow of trade within the United Kingdom. Goods destined for Northern Ireland will travel through a new green lane with a separate red lane for goods at risk of moving on to the EU.

“Food retailers like supermarkets, restaurants and wholesalers will no longer need hundreds of certificates for every lorry and we will end the situation where food made to UK rules could not be sent to and sold in Northern Ireland. This means that if food is available on supermarket shelves in Great Britain, then it will be available on supermarket shelves in Northern Ireland.”

Referencing the process of sending parcels and VAT, he said: “This means we have removed any sense of a border in the Irish Sea. Second, we have protected Northern Ireland’s place in the Union.”

Raffi Boyadjian, lead investment analyst at XM, said the pound was the strongest performer against the US dollar this morning, amid optimism of a Brexit breakthrough.

Read more: Wall Street and FTSE 100 push higher as Brexit deal struck

The much-hated protocol has been an ongoing source of dispute between London and Brussels since the divorce as well as between Republicans and Unionists in Northern Ireland.

A deal could remove barriers for the flow of goods between Britain and the province, paving the way for stronger post-Brexit relations between the UK and EU.

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.”

William Bain, head of trade policy at the British Chambers of Commerce, said it will be "closely considering the legal texts and their full implications" but added the Windsor framework "appears to be a positive step".

Walid Koudmani, chief market analyst at XTB, said the EU-UK deal regarding Northern Ireland will end a lengthy period of uncertainty.

Read more: Bank of England's Mann: 'Too soon to stop interest rate increases'

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.

Watch: Rishi Sunak promises 'beginning of a new chapter' as he unveils 'Windsor Framework' deal on Brexit

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