© Lakov Kalinin, Adobe Stock
Sterling has surged higher this morning after Brexit negotiations finally bore fruit.
The Pound is up between half a percent and a percent at midday after Brexit negotiators Michel Barnier and David Davis gave a press conference announcing a tacit agreement on a 'transition deal' which will keep Britain in the EU till the end of 2020.
GBP/EUR climbed 0.66% to 1.1427 on the news, GBP/USD by 1.02% to 1.4084 and GBP/JPY by 1.27% to 149.62 at the time of writing.
Both the UK and the EU, but especially the UK, wants to delay the official leave-date for Brexit to give more time for negotiations of the minutes of the divorce as well as the form of the new relationship.
It has been argued that a sudden cliff-edge Brexit in March 2019 would be negative for the economy so the tacit agreement of a 21-month extension to December 2020 was seen as positive for both the UK economy and Sterling.
"The economy and the Bank of England have been begging for some sign of progress and stability in negotiations," says Adam Button analyst at LiveForex.com, adding:
"The British Chamber of Commerce is just out with a positive note, saying this transition deal is sufficient for most businesses to plan ahead for investment and hiring," and that "at this point it's clear that the Irish border issues aren't going to scuttled a deal."
The agreement remains subject to ratification by the EU council of ministers who will be meeting for a summit this Thursday and Friday, March 22 and 23, to discuss the matter and take the final vote.
More detail on the status of the UK, its relationship with the EU and the rights of citizens during the transition period - or 'implementation phase' as it is also known - were also announced by the negotiators.
During the transition period, the UK will be able to 'step out' and sign its own trade deals with other countries although the new deals will not come into force until after the end of the transition period.
During the implementation phase, the UK will still be able to enjoy the benefits of current EU trade treaties.
During the transition phase, the fishing agreements between the UK and the EU might alter but the UK's overall quota will not change.
During implementation, the UK and EU will continue to work closely together in the area of national defense in an "ambitious new partnership" although the UK will also be able to exercise independent decision-making during the implementation period.
EU citizen's and their families already living in the UK will be entitled to stay both during and after the transition period and after the UK leaves the EU by applying for 'settled status'.
On the problem of the Irish border, the 'backstop' solution agreed in December of the border remaining open as it does now and Northern Ireland effectively remaining within the EU will apply in the event of another more detailed agreement not being reached.
Get up to 5% more foreign exchange by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here.