The U.K. and EU reached a Brexit deal Oct. 17, paving the way for a vote in U.K. Parliament this weekend amid continued opposition from Northern Ireland's Democratic Unionist Party.
In a statement, European Commission President Jean-Claude Juncker said both sides "reached an agreement on a revised protocol on Ireland/Northern Ireland." The European Council, which began a two-day summit today, endorsed the revised Brexit withdrawal agreement.
Separately, U.K. Prime Minister Boris Johnson said "we've got a great new deal," urging the British Parliament to back the agreement in an Oct. 19 vote.
Sterling rose nearly 0.5% to $1.2894 around 6:40 a.m. ET, having topped the $1.29 level after the announcement, and the FTSE 100 gained 0.6%. U.K. bonds slipped, with yields on 10-year Gilts rising nearly 3 basis points to 0.738%.
EU Brexit negotiator Michel Barnier said the new deal is based on four main elements:
* Northern Ireland will remain aligned to a limited set of EU rules, notably related to goods.
* Northern Ireland will remain part of the U.K. customs territory, but it will remain an entry point into the EU single market. This means U.K. authorities can apply U.K. tariffs on products coming from non-EU countries, as long as goods entering Northern Ireland are not at risk of entering the EU single market. For goods at risk of entering the single market, U.K. authorities will charge EU tariffs.
* The deal will maintain the integrity of the EU single market and meet the U.K.'s legitimate value-added tax demands.
* Four years after the entry into force of the revised protocol on Ireland and Northern Ireland, Northern Ireland's elected representatives will decide whether to continue applying relevant EU rules in Northern Ireland or not.
"This newly agreed Protocol is no longer to be replaced by a subsequent agreement between the EU and the U.K.," Barnier said. "So it makes sense to ensure consent."
According to the revised withdrawal agreement, the U.K. will be responsible for the implementation and collection of VAT in Northern Ireland.
The last-minute agreement comes hours after the DUP, the party that props up Johnson's minority government, refused to back the customs and consent proposals laid out by the U.K. government as part of its Brexit offer.
The DUP said after the U.K.-EU deal announcement that its position has not changed, the Financial Times reported. Opposition Labour party leader Jeremy Corbyn described the draft pact as "worse" than Theresa May's, saying that it should be rejected.
Johnson needs the DUP's support in securing parliamentary approval for a Brexit deal.
The U.K. government needs 320 votes to get the deal approved, with DUP carrying 10 votes.