The pound sterling is approaching a 2½ yr excessive because the UK and EU break by Brexit

LONDON – The British pound was trading near two and a half year highs on Thursday as investors reacted to the UK and the European Union and signed a long-awaited Brexit trade deal.

Sterling cut some gains after the news was released but rose 0.5% for the session to around $ 1.3557. Earlier this month, the currency crossed a 2020 high of $ 1.3624, a level it hasn’t reached since May 2018.

The Brexit negotiators signed a free trade agreement on Thursday after months of tense political dispute over a number of key sticking points.

Confirmation of the deal concluded a long period of tense negotiations on future trade relations between the UK and the EU. Both sides disagreed on a number of key issues, not least on fisheries. The EU wanted to maintain access to UK waters for its fishing fleets while the UK wanted to limit these fishing rights to a large extent.

Looking ahead to next year, Berenberg senior economist Kallum Pickering said a deal would provide support for the pound.

“By eliminating a major downside risk to the UK economy in the short and long term, a deal would unlock significant investment in the UK and support the recovery once the ongoing coronavirus shock wears off, and provide a positive backdrop for UK stocks and sterling on its way into.” Year 2021, “he said in a note on Thursday.

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