Sterling has struggled for direction this morning as traders started to digest the full implications of news of a Brexit breakthrough in Brussels.
Sterling was up 0.1 per cent against the dollar at $1.34 and up 0.3 per cent versus the euro in early-morning trade.
Craig Erlam, senior market analyst at OANDA, said: "The response in the pound to the announcement may come as a surprise given just how significant today's agreement is, but it's worth noting that this has been in the making over the last couple of weeks and it was in both sides' interest to get this done today.
"Had the two sides failed to come to an agreement then the downside in the pound may well have been far greater.
"We've seen a rally in the pound over the last couple of weeks on the expectation of a deal being agreed, so what we may be seeing is simply a case of buying the rumour and selling the fact."
The Commission's announcement came after Prime Minister Theresa May and Brexit Secretary David Davis made an early-hours journey to Brussels to meet European Commission president Jean-Claude Juncker and the European Union's chief Brexit negotiator, Michel Barnier.
Business groups reacted with relief to the news.
Stephen Martin, director-general of the Institute of Directors, said: "It went right down to the wire, but businesses will be breathing a huge sigh of relief that the UK and European Commission have reached agreement on phase one issues, putting us in a good position going into the Council meeting next week."
However, attention will now turn to trade and Mrs May faces another race against the clock to secure a trade deal that delivers the "exact same benefits" of the single market, which her Government has promised the British electorate.
Britain is due to exit the single market and customs union in 2019.