Prime Minister Keir Starmer at the UK-EU Summit at Lancaster House. Picture by Lauren Hurley / No 10 Downing Street.

Pound Sterling is lifted at the margins by EU-UK trade reset.

The UK and EU have negotiated changes to the Brexit deal, a move that the UK government says will boost growth and lower prices.

Prime Minister Keir Starmer said the reset would boost the economy by £9BN as checks on British food exports to the continent are removed and the UK and European electricity markets become more closely integrated.

Starmer said: “It gives us unprecedented access to the EU market whilst sticking to the red lines about not rejoining the single market, the customs union and no return to freedom.”

“This deal is good news for the UK,” says Kathleen Brooks, research director at XTB. “This will immediately help cut red tape for food and drink exports; it will boost energy cooperation and it paves the way for future economic cooperation.”

Foreign exchange analysts have touted expectations for a Brexit reset as another reason to buy the Pound in 2025, saying it tends to do better when the UK is getting closer to Europe.

During the Brexit negotiation period, we recall the Pound would toss and turn on the slightest of headlines and rumours.

However, those watching Pound exchange rates and hoping for a rip higher might have been disappointed with the price action that followed news of a reset:

The Pound-to-Euro is still frustratingly compressed around 1.1886, while against the Dollar, renewed gains have far more to do with developments in the U.S. than they do with UK-EU headlines.

📈 Quarter 2 Investment Bank Forecasts for GBP vs. EUR. See the Mean, Highest and Lowest Targets for the Coming Months. Find Out More.

However, analysts we follow say this is a slow-burning process that opens the door to further improvements, making Monday’s announcement something of a promise of ‘bread for tomorrow’.

“The direction of travel will reassure companies that the terms of EU market access from the UK will at worst be stable and could improve further,” says Andrew Wishart, an economist at Berenberg Bank.

“We can see EUR/GBP continuing to trade a 0.84-0.85 range this summer, with GBP/USD trading 1.30-1.35. But the scope for further UK-EU deals this year suggests the risks to those sterling forecasts are to the upside,” says Chris Turner, FX analyst at ING Bank.

The UK agreed to hand over UK fishing waters to the EU for twelve more years and align with EU food standards. This will allow the flow of food and agricultural goods unhindered. The UK will also merge rules around carbon trading to allow for a more integrated electricity market with Europe.

“Not sure it will do much for the GBP or the UK economy in the here-and-now, but longer term it will definitely be supportive,” says W. Brad Bechtel, Global Head of FX at Jefferies LLC.

The next challenge for the Pound comes on Wednesday with the release of UK inflation data, where a large pick-up in monthly inflation is anticipated. This is followed by the release of Thursday’s PMI survey for May.

However, for foreign exchange markets, it is global sentiment around President Donald Trump’s trade wars and the recent downgrade of U.S. debt by Moody’s that is stealing the show.

To be sure, the Moody’s downgrade news had a limited impact on markets and FX, allowing the Pound to recover against the Euro.

However, the dollar remains under pressure as the days of U.S. exceptionalism are truly behind us, and a longer-term downtrend gets underway.