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The pessimistic expectations of a market reversal did not materialize

The pessimistic expectations of a market reversal did not materialize

aBefore the United Kingdom left the European Union, much was said about its consequences, including for European financial markets. However, expectations about the impact on the financial markets and the value of British assets have yet to materialize, and the British pound is on the rise, with the recovery of the British economy attracting investors.

“Those most pessimistic predictions of failure have not yet been confirmed,” ActivTrades senior analyst Ricardo Evangelista told Lusa.

As he explained, the British currency, which was under great pressure during the referendum that forced the United Kingdom to withdraw from the European Union and during negotiations of the exit agreement due to political uncertainty, was on the rise even as it is the G7 coin with the best performance this year.

“The administration of the vaccination process in the United Kingdom has put the country in the ‘first place’. [na linha da frente] In order for the economy to recover, the investors’ reaction was to support economic assets, especially the pound.

As XTB analyst Henrique Tomé noted that the pound had dropped significantly during the referendum and there was a lot of fluctuation in its value during the negotiations between the UK and the European Union, so after Brexit came into effect “it was expected that the pound could be repaid in a similar way, which did not happen This is attributed to the resilience of the British economy.

“The UK has always had a very strong economy and is somewhat more independent than other member states, and periods of high volatility reflected investor fear and uncertainty about the outcome,” he said, but “the transition has been smooth.”

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Banco BIG’s chief investment strategist, Joao Lambria, added that in December Brexit was identified as one of the last risk factors, in the face of a process that has been dragged and supported by more pressing issues such as the pandemic crisis.

He said, “With all this complex situation for a long time, investors have been dealing with the most serious risks and have had a benevolent effect.”

This is evident, as he explained, in the strength of the pound and the orderly rise in interest rates on the UK’s 10-year debt (by the way, an upward movement following Germany in the same proportion), which means that investors are not doing so. Heavy penalties imposed on credit risk in the insulated UK.

As for the fact that the British FTSE Index is appreciating less than the European Stoxx 600, analysts contacted by Lusa attribute this to the strength of the Pound as it has the effect of penalizing the stock market.

Analysts also agree that the negative effects are “masked by the epidemic crisis”.

For example, Ricardo Evangelista said, “It is difficult to say that part of unemployment is due to the epidemic crisis and that part is due to“ Brexit ”.

This analyst considers the movement of companies that change their activity or part of their activities outside the UK to be able to operate after Brexit as “important”, noting that ActivTrades itself has opened a subsidiary in Luxembourg to continue.

He said that this movement will generally be reflected in the importance of London as a financial center and also in other sectors of the United Kingdom.

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João Lampreia believes that London’s loss of its importance as a financial center is not visible in the near future, but will happen over the next few years and estimates that Amsterdam will focus more financial activities.

“Filming from the point of view of the financial market conditions as a whole has very little impact, the consequences for the UK are more negative, and can be seen in the ‘financial position’, as João Lampreia summarized, adding the effect on trade (exports and imports).

A report by the New Financial Research Foundation, published by Bloomberg in April, indicates that more than 440 financial services firms have moved part or all of their activities outside the UK (Frankfurt, Paris, Amsterdam, Dublin, but also Asia) due to Brexit. European countries, including 7,400 jobs and nearly 1.2 billion assets. The report further considers this to be only the beginning.

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