Sterling advanced against both the dollar and euro, while both London and Paris ended little changed.

British Pound Sterling banknotes are seen at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017.
British Pound Sterling banknotes are seen at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. (Reuters)

The pound has jumped, while European stock markets have been little changed, as Britain and the European Union reached a trade deal after months of talks on the terms of commerce in the aftermath of Brexit.

Sterling advanced against both the dollar and euro, while both London and Paris ended little changed. Frankfurt was closed, while Wall Street ended its own holiday-shortened session modestly higher despite continued uncertainty over a massive US stimulus package.

READ MORE: At last! UK, EU strike a Brexit trade deal

Traders in London said early gains were capped by rising fears over a new strain of the coronavirus that has forced the UK to impose tougher regional lockdowns across the nation.

The pound was the main focus of attention as Britain and the European Union hammered out the final details on an agreement that ensures that Britain will not now face EU tariffs on cross-Channel commerce.

Under the agreement, EU Commission president Ursula Von der Leyen said that although the UK would become a "third country," it would be a trusted partner.

The agreement became possible after the two sides reached a compromise over fishing as both sides haggled over the access EU fishermen will get to Britain's waters after the end of the year.

Economists expect both economies, already weakened by the coronavirus epidemic, to take a hit as supply chains are disrupted and costs mount.

Despite this, the threat of a return to tariffs will have been removed, and relations between the former partners will rest on a surer footing.

READ MORE: European leaders hail post-Brexit trade agreement

US stimulus package

While the post-Brexit talks moved towards resolution a giant US stimulus package remained frozen in place following last-minute criticism from President Donald Trump.

Congressional Republicans blocked a Democratic-backed effort to lift one-time stimulus payments from $600 to $2,000 after Trump called for the change and hinted he would veto the bill without improvements.

Investors have shrugged off the latest curveball on the stimulus after months of stalled negotiations on Capitol Hill, viewing the back-and-forth as dealing the bill a delay rather than a mortal blow.

"These are cantankerous political matters, yet the market isn't overly bothered by them because, in its mind, it's a matter of when, not if, a stimulus deal will be passed," said Briefing.com analyst Patrick O'Hare.

About 14 million jobless workers w ill lose their pandemic unemployment benefits right after Christmas if the bill is not enacted, and millions more face losing their home when an eviction moratorium expires at the end of the year.

READ MORE: GOP blocks $2,000 checks as US President Trump leaves Covid aid in chaos

Recent data have shown worrying signs that the world's largest economy is faltering after the sharp rebound in the third quarter fuelled by the $2.2 trillion CARES Act that Congress approved in late March, just as the pandemic restrictions were taking hold.

Source: AFP