Sterling maintained its buoyancy in late afternoon trading in London after the UK parliament voted in favour of the deal 521 votes to 73 on Wednesday.
“With the path of the Brexit deal expected to be smooth, sterling continues to be driven by broader market price action,” said Simon Harvey, FX market analyst at Monex Europe. “A weaker dollar has been the main theme of FX markets again this week, with liquidity conditions thin as real money players sit on the sidelines over the festive break.
The pound gained 0.8% against the US dollar (GBPUSD=X), sitting at $1.3605 at around 3pm in London.
It also continued its winning streak against the euro (GBPEUR=X), up 0.4% as it sits at $1.1062.
European Commission president Ursula von der Leyen and European Council president Charles Michel formally signed the documents earlier on Wednesday morning during a brief signature ceremony in Brussels.
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While the Brexit deal represents a historic move for the UK to independently broker its own trade deals globally, it falls short for financial services, which is a mainstay of the UK economy.
The Resolution Foundation, a think tank, said the Tier 4 restrictions imposed in much of England will result in 4.3% growth in 2021 compared to the 5.5% forecast by the Office for Budget Responsibility.
The deal “provides little relief for a beleaguered UK economy,” Harvey added, and that “one risk to a firming pound in the coming trading sessions remains the domestic COVID-19 outbreak, however, with rumours floating around that more of the UK economy will be subject to tighter lockdown conditions.”
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