Sterling strengthens after U.K. signed a new post-Brexit trade deal with EU

The Pound Sterling rebounds to nearly $1,2080 on Tuesday morning following the new trade deal between the U.K. and the European Union, which will likely remove some trade frictions between the two parties after Brexit.

GBP/USD pair, 1-hour chart

On early Monday, the GBPUSD pair bounced 1% from the yearly lows of $1,1950 to the current highs of $1,2080 following the announcement by British Prime Minister Rishi Sunak that the U.K. has struck a deal with the European Union on post-Brexit trade rules for Northern Ireland.

The trade deal, known as the Windsor Framework, seeks to resolve the tensions caused by the trading rules for the only part of the U.K. that has a land border with the EU, and it will likely pave the way for a better relationship between London and Brussels.

The British parliament is expected to vote on the deal, with the opposition Labour Party saying it will vote in favour, while the leader of Northern Ireland's Democratic Unionist Party (DUP) said his party was working through the details, which should make trade smoother for businesses by easing rules.

British assets showed some strength after the announcement as the deal brightens the outlook for the post-Brexit U.K. economy and marks improved relations between London, the Eurozone’s bloc, and the United States, by removing some of the uncertainty that has hurt British assets since the 2016 vote to leave the bloc.