The pound has risen after a Brexit deal was agreed between UK and EU negotiating teams.
Sterling jumped more than 1% against the dollar at first, climbing above $1.29, after Boris Johnson said the UK and EU had agreed a “great new deal”.
The pound also rose against the euro, although it failed to hang on to its initial gains.
Analysts noted difficulties remained after the DUP party reiterated its opposition to the deal.
Worries about the possibility of the UK leaving the EU without a deal have been weighing on the value of the pound, as markets view a no-deal Brexit scenario as damaging for the UK’s economy.
Sterling has risen in value whenever there have been signs that a deal could be reached.
Announcing news of the breakthrough in the Brexit talks, European Commission President Jean-Claude Juncker said the deal was “a fair and balanced agreement for the EU and the UK and it is testament to our commitment to find solutions”.
“I recommend that [EU summit] endorses this deal.”
Paul Dales, chief UK economist at Capital Economics, said: “If the Brexit deal agreed by the EU and UK earlier today passes through Parliament, then there is scope for economic growth, interest rates, gilt yields and the pound to all rise further than is widely expected.”
The agreed deal will still need the approval of both the UK and European parliaments, while Northern Irish party the DUP has cast doubt on its sign-off, saying it still cannot support it.
Earlier, the DUP released a statement saying it could not back proposals “as things stand”, and – after the PM’s announcement – said its statement “still stands”.
Analysts warned that this opposition from the DUP could still scupper the deal.
Michael Brown, senior analyst at Caxton, noted that “some of the wind has been taken out of the pound’s sails after reports that the DUP are not yet on board to back a deal”.
“The Parliamentary arithmetic for passing a deal looks challenging,” he said. “Attention will continue to focus on whether the new agreement will pass in the Commons on Saturday, while sterling traders will continue to pay close attention to developing headlines from this afternoon’s EU summit.”
News of the deal also lifted the stock market, with the FTSE 100 index up 0.6%.
Shares in companies with heavy exposure to the UK economy – such as housebuilders and banks – saw some of the biggest increases.
Adam Marshall of the British Chambers of Commerce said many businesses would “reserve judgment until they see the detail”, adding that firms “need a chance to analyse precisely what the terms of this agreement would mean for all aspects of their operations”.
“Let’s not forget, we’ve been here before,” he added. “There is still a long way to go before businesses can confidently plan for the future.
“For business, this deal may be the end of the beginning – but it is far from the beginning of the end of the Brexit process.”