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Sterling plunged to new lows against both the dollar and the euro on Tuesday as the UK’s decision to leave the European Union continues to batter investor confidence in the country.

The move came as the Bank of England announced moves to help boost lending by up to £150bn (€177bn) as it warned over a “challenging” outlook for financial stability after the Brexit vote.

It has slashed funding rules for banks as part of measures to shore up the economy and financial system in the wake of the referendum and said it “stands ready to take any further actions” if needed.

The pound plunged to 1.3117 dollars, down 12% since the Brexit vote and hitting a 31-year low. Sterling also fell to its weakest level against the euro since 2013 at 1.1787 euros.
The currency was dented after data showed Britain’s dominant services sector slipped back last month as Brexit uncertainty intensified.

The closely-watched Markit/CIPS services purchasing managers’ index (PMI) recorded a worse-than-expected 52.3 in June, down from 53.5 in May and below economist expectations of 52.8.
Measures by the Bank of England to help prop up the British economy, which include relaxing funding rules for banks to boost lending by up to £150 billion, failed to buoy the pound.

Lukman Otunuga, analyst at FXTM Research, said: “Sterling was left vulnerable to losses during trading this week following the dismal UK construction PMI for June which rekindled concerns over a possible slowdown in domestic economic momentum.
“This disappointing data comes at a time when the ongoing Brexit uncertainty and global instabilities have exposed the UK economy to downside risks.

“Concerns are elevated over a possible Brexit-fuelled recession and with expectations mounting of a probable UK interest rate cut, pound weakness could be the recurrent theme in the global currency markets.
“It should be kept in mind that the persistent post-Brexit uncertainty has haunted investor attraction towards the Sterling consequently sabotaging any real recovery in value.”

The Bank of England unveiled the measure in its twice-yearly Financial Stability Report, which cautioned over the impact of the vote.
It said: “The current outlook for financial stability is challenging.

“There will be a period of uncertainty and adjustment following the result of the referendum. It will take time for the UK to establish new relationships with the EU and the rest of the world.”
But it said that, despite a severe hit to the pound and falls of up to 20% for bank shares since the referendum, the banking sector has so far proved resilient, with little sign so far of a credit squeeze.

Article Source: http://tinyurl.com/kbwqb42

The Irish Government would consider making an attempt to house the European Banking Authority (EBA) in the event of its relocation from London but as yet there is no specific plan in place, the Irish Independent understands.

Finance Minister Michael Noonan has said the Government is committed to maximising any opportunities that might arise out of the UK’s vote to leave the European Union.
The EBA is a banking watchdog body that aims to “safeguard the integrity, efficiency and orderly functioning of the banking sector” across the EU, with around 160 employees in London. It would have to relocate when Brexit takes effect.

Other countries have been quick to stake a claim for its new headquarters.
Spain’s deputy prime minister said on Friday that it would look to host the EBA’s HQ, with other cities including Paris and Frankfurt also in the race.

Spain has set up a working group to drive its bid for the EBA and for the London-based European Medicines Agency, Soraya Saenz de Santamaria told a news conference.
The EBA is expected to be relocated “soon”, two EU officials told Reuters shortly after the UK referendum. On Wednesday, Fine Gael MEP Brian Hayes said Dublin would serve as an ideal location for the EBA, given that many of Europe’s biggest banks conduct operations here.

“This is now up to the Government to convince European colleagues that Dublin is the most suitable new location for the authority,” Mr Hayes said.
“Dublin shares the closest similarities to London in terms of language, business environment and financial services activity. This would make a move to Dublin much smoother than other capitals.”

Meanwhile, Mr Noonan has said the Central Bank has enough regulatory resources to cope with an influx of financial services firms in the aftermath of the Brexit vote, saying he is confident it is capable of significantly expanding its capabilities given that it has done so in the past. (Additional reporting Reuters)

In Numbers

160: The number of EBA employees in London

38,000: The number employed in the financial services sector here
€38m: The EBA’s revenue in its 2016 financial year

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A post-Brexit recovery across European markets stalled on Monday with major share indexes mixed while safe-haven demand for precious metals helped the price of silver surge to a near-two year high.

Light trading volumes ahead of a public holiday in the United States is likely to keep markets choppy through the day.
Europe’s Stoxx 600 fell 0.3 percent and London’s FTSE 100 .FTSE fell 0.1 percent with weaker financials offsetting gains from shares in mining companies.

Earlier in the day, the Australian dollar recovered from a wobbly start caused by political uncertainty while Asian shares and base metal prices rose, partly on expectations of economic stimulus from China.
JPMorgan strategists warned investors against chasing the rally in risky assets.

“We do not believe that we will see a sustained upmove. Positioning is not washed out, market internals are not positive and political uncertainty will linger,” they wrote in a note.
Caution is likely to persist through the week with the Bank of England scheduled to publish its quarterly financial stability report on Tuesday, the June U.S. Federal Reserve meeting minutes due on Wednesday and U.S. jobs data on Friday.

In bond markets, borrowing costs in the euro zone rose for the first time in more than a week as investors took prices down to make room for some 20 billion euros of bond supply from the region this week, halting a post-Brexit slide in yields.
Sterling was little changed at $1.3279 GBP=D4, nursing its losses after an 11-percent plunge to a 31-year trough of $1.3122 a week ago following last month’s shock Brexit vote.

The weekend’s headlines were dominated by mixed messages from the candidates seeking to replace David Cameron as Conservative Party leader and prime minister, offering markets little certainty about the outlook for the months ahead.
The euro edged slightly lower to $1.1115 EUR= and was down slightly against its Japanese counterpart at 114.27 yen EURJPY=R. The dollar rose 0.2 percent to 102.65 yen JPY=.

Crude oil prices extended gains from Friday’s surge after comments by the Saudi energy minister that the oil market is heading towards balance despite signs of slowing demand in Asia.
Spot gold XAU= added 0.6 percent to $1,350.40 an ounce after gaining 1.5 percent on Friday and about 9 percent in June.

Silver XAG= spiked 1.4 percent higher to $20.01 an ounce, breaking the $20-dollar level for the first time in nearly two years.

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The UK is set to dramatically slash corporation tax rates to woo businesses deterred by Brexit, placing it in direct competition with Ireland for vital foreign direct investment.

British Chancellor George Osborne outlined plans to aggressively cut its corporate tax to less than 15pc as he unveiled his plan to galvanise the economy.
This would take Britain close to the 12.5pc corporation tax rate in Ireland, which has been a cornerstone of our economy and helped attract major employers, including Apple, Pfizer and Google.

Business group Ibec said Mr Osborne’s stance reinforced the need for significant reform in the upcoming Budget, to make us more attractive to foreign investment.
Meanwhile, Taoiseach Enda Kenny will today propose the creation of an all-island forum to deal with the fallout from British voters’ decision to leave the European Union.

But the attitude of DUP leader Arlene Foster and her colleagues will be crucial to this plan.

The Government and IDA were already under huge pressure to ensure Ireland can reap the benefits of Brexit, with the British economy reeling from the referendum result of 10 days ago.

But now that challenge grows ever larger. Mr Osborne is intent on giving the UK the lowest corporation tax rate of any major economy, announcing a target of less than 15pc in an interview with the ‘Financial Times’.
Mr Osborne said Britain should “get on with it” to prove the country was still “open for business”.

He will also lead a delegation to China later this year to court fresh inward investment for the UK.

Business group Ibec said this reinforces the need for significant reform in the coming Budget to make us more attractive for foreign investment.

A Government spokesman said it would “always promote our competitive and transparent tax rate.”

Minister of State for EU Affairs Dara Murphy, said that the whole post-Brexit situation posed huge challenges. But Ireland still retained advantages with a dynamic, educated, English-speaking workforce.
Mr Murphy stressed that Ireland was a permanent EU member state, with the euro and full single market access. And the IDA added that our tax regime was “one part of Ireland’s offering, which also includes the ease of doing business, access to talent, and access to the European market”.

Fianna Fáil Finance Spokesman Michael McGrath warned there must be “no knee-jerk reactions” to the British finance minister’s announcement.
“There is a sense of panic in Britain in the wake of the referendum result and this decision is a measure of the grave difficulties they face post-Brexit. But there must be no panic here, no knee-jerk reactions and we must stay with our 12.5pc rate.”

Mr McGrath said “it was a throw of the dice which may or may not happen”.

He said it was a further challenge to the IDA and other State agencies to keep selling Ireland.
The developments follow hot on the heels of dramatic cuts to UK taxes announced in March, already threatening Irish efforts to retain and attract international investment.

And while Mr Osborne had previously indicated that he would slash the corporation tax from 20pc to 17pc by 2020, this goes much further.

The UK has radically closed the tax gap in recent years. In 2008, the UK corporation tax was 30pc, and now it looks set to become half that rate.

Ibec CEO Danny McCoy said: “Ibec has long highlighted the competitive threat from the UK’s increasingly pro-business tax regime. New plans to cut the UK’s corporation tax rate is a further wake-up call that cannot be ignored.”

A Dublin Chamber of Commerce spokesman said: “If we don’t react, we’re becoming less and less attractive. With the fall in Sterling aiding UK exporters versus Irish ones, it’s a crucial time and the Government has to act.”

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Ireland has moved into the top 10 ranking in a global reputation study.

Amid the economic warnings over the Brexit fallout and the impact it could have here, Ireland has been ranked in ninth position by the public across the G8 nations out of 55 countries surveyed.
However, the survey, published by The Reputations Agency was carried out earlier in the year, before the Brexit vote.

Sweden is the country with the world’s best reputation, according to the Country RepTrak 2016 study.
Sweden and Ireland were the main movers in the top ten list in 2016. Sweden rose to become the world’s most reputable country moving from third spot in 2015. Ireland is a new entry to the top ten list, rising two places from 11th place in 2015.

Ireland improved its scores across each of the 17 attributes which drive a country’s reputation.
Improvements were seen most significantly in the ‘offers a favourable environment for doing business’ category, and the ‘is run by an effective government’ and ‘has adopted progressive social and economic policies’ categories.

In second place is Canada, with Switzerland third.

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Fund manager Fidelity plans to move around 100 jobs from Britain to Dublin as a part of its long-term strategy, a spokesperson said in an email to Reuters.

The company said the move was part of an existing plan and was not related to Britons’ vote last week to leave the European Union.
It said it was already recruiting new staff in Dublin but did not say which jobs would shift from London.

“Dublin is an important location for us and has been since 2000,” the spokesperson said, adding that the company signed a lease on a bigger office in the Irish capital earlier this year.
The fund house said it would continue to make considerable investments in its domestic business in Britain.

Fidelity, which counts London as its largest investment hub, employs around 2,500 staff across its three main offices in London, according to its website.

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Cantor Fitzgerald has lowered Ireland’s growth forecasts for the coming years on the back of the Brexit vote, as the International Monetary Fund warned the uncertainty the result created is the biggest risk to the global economy.

It came as ratings giant S&P downgraded the EU’s credit rating yesterday on the back of the vote.
It follows Wednesday’s announcement by the Central Bank of Ireland that it would be revising its economic forecasts.

Bank of England Governor Mark Carney yesterday moved to reassure investors and the public that the regulator would act to deal with the fallout from Brexit, but warned uncertainty could hurt the UK economy.
The pound – which had steadied in recent days, weakened amid speculation Mr Carney could ultimately announce a cut in interest rates, after strengthening in the wake of the surprise announcement that Boris Johnson would not be standing for Prime Minister.

By contrast, stock markets increased on the back of Mr Carney’s speech and the suggestion that monetary policy could be eased over the summer months in a bid to shore up the Brexit-hit UK economy.
The FTSE reached a 10-month high, closing up over 2pc, while the ISEQ finished almost 1pc higher.

However, a number of global voices continued to warn about the impact of last week’s vote.
The International Monetary Fund said uncertainty over Britain’s looming departure from the EU will dampen near-term economic growth for the UK and the rest of Europe, and will also affect output globally.

Credit Suisse warned that global growth would shrink as a result of the Brexit vote, and billionaire investor George Soros said the vote had unleashed a financial markets crisis, similar to what happened in 2007 and 2008.
Cantor Fitzgerald Ireland said the market reaction to the vote had been “more contained” than had been anticipated.

Nonetheless, it cut its growth forecasts for Ireland this year to 3.8pc from 4.4pc, and for next year to 2.4pc from 3.8pc.
“We have revised our Irish growth forecasts lower for the next three years,” Cantor said.

But it remained upbeat on the strength of the Irish economy. “Strong growth over the last two years has created significant buffer room for Ireland to help withstand this external shock,” it said.
In its latest bi-monthly research report, leading commercial property agents CBRE said that while the UK’s decision to vote in favour of Brexit had always been a “distinct possibility”, the result announced last week “took the commercial real estate world by surprise”.

In a general comment on the UK electorate’s decision, CBRE said it would be some time before there is clarity on how the Irish economy – and in turn the real estate sector – will be affected by what it described as “this unexpected development”.
Meanwhile, Slovak finance minister Peter Kazimir has said Brexit will be “no fun” for his Irish counterpart Michael Noonan, but said it would not prove fatal for the Eurozone economy.

“I can imagine for Michael Noonan this is going to be a problem,” said Mr Kazimir, whose country is taking over the EU’s rotating presidency today. “It is not fun for countries in this corner of Europe.”

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AKO Capital, a $9.5bn London-based hedge fund, has taken a 3pc stake in Bank of Ireland, securing its holding in the company last Friday as equities slumped on the back of the Brexit vote.

It’s the first time that AKO has held a notifiable interest in the Irish bank, it’s understood.
Shares in Bank of Ireland were the heaviest hit in the stockmarket rout that occurred last Friday and on Monday following the Brexit vote, with the stock slumping almost 40pc at one point.

AKO Capital has notified the stock exchange that it has built its 3pc stake through contracts for difference (CFDs) – instruments that allow investors to bet on shares rising or falling, without actually owning the underlying shares outright.
AKO confirmed that it had breached the 3pc level in Bank of Ireland last Friday.

US-based Capital Group has also boosted its stake in Bank of Ireland. It held 6.55pc of the bank prior to last Thursday’s Brexit vote, but breached the 7pc mark last Friday.
Bank of Ireland’s shares fell more than 24pc at one stage last Friday.

Peter Towler, a partner at AKO Capital, declined to comment about the firm’s stake in Bank of Ireland.
“It is our general policy not to discuss our investments or process,” he said.

AKO was established in 2005 by Nikolai Tangen. He was previously a Partner at Egerton Capital, and also worked with Cazenove as an analyst. A Norwegian, he is now one of the UK’s richest people, with a £288m fortune.
Bank of Ireland shares were under pressure again yesterday, falling almost 3pc by lunchtime.

Earnings at Bank of Ireland’s UK wing could fall by 6pc next year and as much as 17pc in 2018, Davy Stockbrokers warned. And Davy said a dividend from the bank to shareholders due next year will be lower than expected.

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Esprit Holdings said Britain’s vote to leave the European Union could affect consumer sentiment in its key markets in Europe, as global businesses and political leaders grapple with the fall-out of last week’s “Brexit”.

Britain’s vote to leave the EU has reverberated through global financial markets, with the pound falling to its lowest level in 31 years, despite government attempts to relieve some of the confusion about the political and economic outlook.
“There is risk for an impact on the general consumer sentiment across Europe, where the majority of our business is located, but it is impossible to predict its timing and reach,” Thomas Tang, Esprit’s chief financial officer said in emailed comments to Reuters on Thursday.

“We obviously remain attentive to the developments in this most important matter… As for any broader impacts on the business, there are still too many uncertainties.”
Tang added the other immediate impact was the pressure on Euro currency exchange rates and that the firm had hedged most of its sourcing costs for full-year 2016-17 to protect margins over the next 12 months.

The United Kingdom itself contributed slightly less than 1 percent of the group’s revenue, and Brexit will have little direct impact on its global top line, Tang added. Esprit posted revenues of HK$19.4bn ($2.5bn) last year.
Esprit had said in March that it aimed to increase its margin by around 1 percentage point over the next two years, to close loss-making stores in Europe and APAC over the next 2-3 years, and to reduce operating expenses by at least HK$1.0bn in over next two years.

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Irish oil explorer Tullow Oil is expecting the TEN Project to deliver oil within the next three to six weeks – its first delivery oil since the company started the project three years ago.

In a trading update released to shareholders this morning Tullow chief executive Aidan Heavey also said that production at its Jubilee field has stabilised with a gross rate for June of around 90,000 barrels of oil per day.
“In East Africa, the Governments’ agreement that there will be separate pipelines to develop resources in Uganda and Kenya brings greater clarity to both projects.

“In addition in Kenya, a new programme of exploration wells focusing on growing resources is due to start in the fourth quarter. The New Ventures team remains focused on high grading and replenishing the exploration portfolio with a new licence signed in Zambia and ongoing portfolio management and seismic survey activity in South America,” Mr Heavey said.
The firm’s full year capital expenditure guidance has remained consistent at $1bn with some savings being offset by addition capex associated with an issue regarding its turret in the Jubilee field.

Tullow estimated net debt at the end of June stood at $4.7bn with unutilised debt capacity and free cash volumes of around $1bn.
In April the company completed a redetermination of its reserve based lending, securing available debt capacity of $3.5bn.

Tullow’s first repayment on its reserve based lending is due in October of this year, which is valued at around $500m.
During the first half of the year the company also agreed a year-long extension to the maturity of its corporate facility, bringing it up to April 2018.

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