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ECB: worst-case Brexit is worse than global financial downtime
The United Kingdom risks a greater hit to its national economy than during the global financial downtime last decade if it departs from the European bloc in a disorderly way in March 2019. That’s what the Bank of England told on Wednesday.
The British economy is shrinking by 8% for a year, in contrast with 6.25% in the crisis, responding to severe border delays as well as financial markets' loss of confidence in UK institutions.
Additionally, unemployment would head north to 7.5%, with just the mass emigration of employees stopping it surpassing its crisis maximum.
The given scenario is not what the UK major financial institution considers to be the most probable result if Great Britain leaves the European bloc without a deal, although it represents a plausible result that it has asked UK financial institutions to protect themselves against.
The British banking system is firm enough to keep serving British households as well as businesses even in case of a disorderly Brexit.
A merely disruptive Brexit, where products still flow across borders, although facing levies as well as non-recognition of standards, would provoke a 3% sink in GDP, as the major financial institution warned.
The previous week BoE Governor Mark Carney backed a Brexit agreement struck by UK Prime Minister Theresa May, telling that the alternative of departing from the European bloc with no transition could resemble the 1970s crude shock.
Earlier, government experts predicted that leaving the European Union without an agreement could leave the United Kingdom nearly 10% poorer after 15 years in contrast with staying in, if it provokes a freeze in net immigration from the EU.
The Bank of England told that a "close" future relationship with the European bloc after Brexit could provoke faster economic surge than it projected earlier this month.
USD’s rally takes a pause, while riskier assets are modestly rising.
Poor US data, slow vaccine distribution, rising virus cases worsened the market sentiment and underpinned safe-haven currencies like the USD, and JPY.
The market optimism waned amid stricter restrictions to control rising coronavirus infections. S&P 500 and Nasdaq dropped from the all-time highs, while the USD jumped higher.
S&P 500 skyrocketed to the all-time high on optimism that Biden’s fiscal stimulus will support economic growth and boost corporate earnings.
PMI reports from the EU, the UK, and the USA will be released during the day!