A rising pound could allow for foreign investors to back into Britain and push up share prices
14 January 2021 • 8:48am
Investors have much to consider after Britain and the European Union reached a Christmas Eve agreement over Brexit. The end of negotiations is a relief for many, including British companies.
However, the reaction of markets will carry more nuance.
Brexit uncertainty has made Britain an unattractive home for international investors cash since the 2016 vote. A falling pound and subsequent currency volatility meant the value of British investments was a roll of the dice rather avoided.
Following the news that the two parties had reached a trading accord, the pound fell, although in the long term it should strengthen against other currencies – as it has done in the past amid positive news surrounding a deal.
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Professional investors have said they are the the most optimistic they have been all year about stock market returns in 2021 and have just 4pc of their portfolios in cash, according to a survey by the Bank of America Merrill Lynch.
However, an economic recovery and any subsequent stock market gains are in no way guaranteed. Delivering the numerous vaccines to the masses is a tricky task. This week, London was placed into tier three, forcing millions to stay inside and businesses such as pubs and theatres to close again.
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Where to invest if there is a deal
For many international investors Brexit makes Britain an unattractive home for investment as the risk of volatile movements in the pound is a roll of the dice they would rather avoid.