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World Brexit 'endgame' will see a last-minute compromise between the UK and EU — boosting equities and the pound, one top strategist says

16:12  27 september  2020
16:12  27 september  2020 Source:   businessinsider.com.au

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And Citigroup Inc. foreign-exchange strategist Adam Pickett said the market hasn’t priced in the likelihood of the U . K . and the EU moving toward a last - minute agreement, targeting a pound climb back to $ 1 .35. Brexit fatigue could be one reason why markets are so far mostly positioned for a deal.

Once outside the EU , Britain will have no say in setting these rules. European judges will still It would keep open the Irish border, but create a deeper regulatory divide between Northern Ireland There is no simple way out of this endgame . Whether the Brexit deal is accepted or rejected, it will scar Britain

a person standing in front of a building
  • A Brexit "endgame" may force a last-minute trade agreement between the UK and European Union, a chief strategist said on Thursday.
  • "There is so much at stake for the UK" that failure to agree on a deal would deliver a major blow to the recovery in the economy, Jeffrey Kleintop, Charles Schwab's chief global investment strategist, told Business Insider.
  • Prime Minister Boris Johnson will most likely strike a last minute deal in mid-to-late October, giving a significant boost to UK financials and the pound, he said.
  • UK stocks have declined over 20% this year, sharply underperforming other European markets.
  • Visit Business Insider's homepage for more stories.

The battle over Brexit is reaching an "endgame" and this could force a last-minute compromise between the UK and the EU, which could potentially boost UK equities and the pound, Charles Schwab's Jeffrey Kleintop said on Thursday.

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- Financial experts warn expats they could lose banking access - EU plans for future on basis of no deal - Post- Brexit warnings for holidaymakers - The sale European companies are losing hope of a Brexit deal, according to Bloomberg. Talks on a trade deal between Britain and the EU are heading into a

The UK 's fate will be decided as political drama escalates in the coming months. The leaders are pictured together at Chequers last July. A defeat would be the fourth time her deal with the EU has With EU leaders such as France's Emmanuel Macron increasingly frustrated by the Brexit limbo, the

If Conservative Prime Minister Boris Johnson avoids a "no-deal" Brexit, this will ultimately benefit UK financial stocks and the pound, and revive confidence in the economy's recovery.

"Final negotiation will be very important in terms of determining how successful the Johnson administration is on getting what they want out of Brexit," Kleintop told Business Insider.

Explaining why he thinks a surprise compromise will be reached, Kleintop pointed to how Johnson's government agreed to the withdrawal agreement in October last year that he and Theresa May had rejected only a few months earlier.

It was "kind of the same that was proposed all year and ultimately when it came down to the last minute, the UK gave in," he said.

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As the negotiations on Brexit between London and Brussels continue to make little headway, there’s a view in the UK that the EU will agree to a last - minute deal. There is therefore a distinct possibility that the UK will either leave without an agreement or that the Brexit deadline will be extended – two

Michael Gove says UK will not withdraw legislation Brussels says may trigger sanctions. The Brexit talks appear to be on the point of collapse after Britain flatly rejected an EU ultimatum over the government’s If you believe in partnership between the UK and the EU like I do then don’t accept it.”

"The same thing may happen this time. There is so much at stake for the UK, particularly with regard to providing financial services and a number of other key exports, that they will find a compromised solution at the last minute. I think this was an effort by Johnson to at least appear to be pushing for the most aggressive solution he could find favouring the UK."

The prospect of Britain leaving the EU at the end of the year without a trade deal in place has taken its toll on UK financial markets. The FTSE 100 is one of the worst-performing European stock indices this year, with a loss of 23%, compared with a 5% loss in Frankfurt's blue-chip DAX.

With a 4% loss against the dollar this year, the pound is the worst performing G7 currency as well. Britain has suffered the highest death count in Europe from coronavirus, with around 41,000 dead.

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It was perhaps inevitable that the Brexit endgame would be a flurry of ultimatums, as the supposedly immutable deadline of March 29 This seems to be the outcome currency markets are expecting in holding sterling steady, though a long extension would probably also see a strong rally for the pound .

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Kleintop outlined three potential results of a last-minute trade deal between the UK and EU:

  • A rally in UK stocks, and to a lesser extent EU stocks.
  • Gains in UK financial stocks due to a lower risk of a reduced marketplace and negative yields.
  • A rise in the pound as the prospects for negative yields fade.

Until a resolution in mid-to-late October, uncertainty over a trade deal and expectations that the Bank of England will shift to negative rates later this year will continue.

"Failure to agree on a deal would deliver a major blow to the U.K. economic recovery," Kleintop said in a note.

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usr: 0
This is interesting!