One potential reaction from a Brexit deal was a ‘buy the rumour sell the fact response’. This would be where the GBP was sold off despite the good news of a deal. This response often happens when a deal or economic outcome is expected for some time in advance as was the case for Brexit.
However, this did not happen with the GBP on the Brexit deal. This is revealing. It means that the narrative to the case for investors waiting on the sidelines for a post Brexit deal makes sense. Investors have been waiting for Brexit to be finally agreed before releasing investment into the UK.
If this is indeed the case then the UK’s FTSE 100 could potentially stand to benefit considerably over the course of 2021. Prior to the Brexit deal the UK struggled to attract investment in comparison with other European bourses due to the uncertainty. That uncertainty has now passed. The UK is currently struggling with a resurgence of COVID-19 and the new variant which has caused the UK to fall into another lock down. However, the FTSE 100 could stand to gain in value over the year.
One way to enter is on a break of the weekly ascending trend line. It is a higher time frame and the entry and exit would be simple. Stay above the trend line, stay in. Fall below the trend line, get out. Profit could be taken at previous highs. The other option would be to hold the trade into April before the seasonally weak summer.
- The vaccine rollout goes wrong.
- COVID-19 proves resistant to vaccine.
- The UK economy hit by some as yet unknown factor.