Sterling enjoyed a small rally yesterday as the government announced an agreement on the next steps for Brexit, overriding the ‘oven ready’ Northern Ireland Protocol initially introduced in 2021 by Boris Johnson. With nearly seven years and five prime ministers since the original referendum in 2016, is the end of Brexit nearly in sight?
Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen, announced that a trade-agreement – known as the Windsor Framework – had been reached that would seek to ease friction between the UK and Ireland following concerns over any potential border in the country that would breach the Good Friday Agreement.
The agreement will see a ‘green-lane’ system for goods entering Northern Ireland only, and should help remove the extensive paperwork many businesses had been lamenting. So far, businesses seem optimistic that the deal would help, and have welcomed any progress on the deal that could bring some certainty back to trade between mainland UK and Northern Ireland.
The deal is far from done however, with MPs across the political spectrum expected to pick over the agreement for the all-important details that could still see it sunk by key parties such as the DUP. There has been some initial positivity in principal, but the coming days could still see further haggling and amendments requested before the deal is put before a vote by MPs. Labour have also confirmed it will support the new deal, which should be enough to overcome any rebel Conservatives.
Yesterday saw Sterling rally against both the dollar and euro, rising from $1.193 to $1.209 and €1.132 to €1.139 as of this morning. Any easing of trade will certainly be a boon to the UK economy and prompted the relief rally for sterling, but the small gains reflect the limited impact the deal will have compared to the economy at large.
The stronger pound saw gold and silver pull back further from their recent highs. Gold has fallen just below £1,500 per ounce so far today, its lowest price since the end of 2022. Silver is hovering at around £17 per ounce, a level not seen since early November 2022. Should the deal be agreed and ratified there could be further gains for sterling, though the strength of this will still mainly be determined by the Bank of England’s next interest rate decision, and whether the UK economy enters a recession.