How will Brexit affect the pound? Euro and dollar changes
BORIS Johnson today saw his historic Brexit deal passed into law by MPs.
Ministers this afternoon voted by 521 to 73 in favour of the Brexit trade deal, which will come into force from January 1.
⚠️ Read our Brexit live blog for the latest news & updates
Just seven days before the final deadline, the UK and Europe have hammered out an agreement governing the future of trade between the two blocs.
The ink is still drying on the 2000-plus page agreement, which outlines the rules around everything from fisheries and batteries to Ireland and car production.
But what does a deal mean for the pound, the euro and the dollar? We explain.
It came as:
- A Downing Street press conference is expected this afternoon
- The Oxford University/AstraZenca vaccine was approved by regulators today - with a million doses a week to be rolled out from next week
- And a change in strategy is expected to take place so people can get the vaccine sooner - with ministers to prioritise the first jab and give the second within 12 weeks
- More than 53,000 cases of the virus were reported yesterday
- A major incident was declared in Essex over Covid as hospitals struggle to cope with demand
- School pupils in some years are likely to be delayed to returning to the classroom thanks to the spike in cases
How will a Brexit deal affect the pound?
Big announcements such as this usually have significant impacts on currency valuations, and today's is no different.
The pound rose against the dollar and the euro this afternoon shortly ahead of the deal being passed in the House of Commons.
The pound at 2.40pm was at 1.10 versus the euro, and 1.35 against the dollar.
However, even with a deal secured, analysts warn that markets are likely to be volatile for some time now.
Giles Coghlan, chief currency analyst at HYCM said: “For investors, it is important not to be rash... There will be a period of volatile trading as the market adjusts to UK’s new economic relationship with the EU.
"However, the market will also settle down in the coming months. That’s why it is important not to let the events of the coming weeks distract an investor’s long-term perspective on what the future could bring.”
And the pound is likely to see further fluctuations as analysts examine the deal to understand all the details of the agreement.
Lee Hardman, MUG strategist "The best case scenario for the pound would be if we also see details released form the EU and UK side of things alongside the deal to try and reduce the initial disruption when we shift to a new trading arrangement."
Most people only think about currency rates when it's time to get money for a holiday.
But actually, the strength of the pound has impacts on other areas of your finances including pensions, savings and investments too.
From a pensions and investments perspective, a stronger pound can actually lead to a weaker FTSE as some companies receive their revenues in dollars. That means that a rising pound actually means a pay cut for those businesses.
A stronger pound is also worrying news for the UK's exporters, as their goods become relatively more expensive for overseas buyers.
On the flip side, a strong pound is good news for importers who will get more bang for their buck when buying goods.
Most read in Money
The UK imports more than it exports so a stronger pound is generally considered to be good news, and could mean cheaper goods for UK households.
READ MORE SUN STORIES
It can also directly impact the goods you buy. For instance, as petrol is priced in dollars, the cost of filling up your car could get more affordable too.
Lauri Halikka, a strategist at SEB in Stockholm : “The trade deal…is positive for the markets and sterling for sure, as some of the risk premium can be erased if the deal will be sealed.