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Carney Urges Banks to Prepare for All Potential Brexit Outcomes

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  • Carney Urges Banks to Prepare for All Potential Brexit Outcomes

Bank of England Governor Mark Carney urged banks to get contingency plans in place for all potential Brexit outcomes, in comments a week after the government triggered its formal exit from the European Union.

In a speech in London, Carney said the transition poses a risk to financial stability and warned that if it leads to reduced cooperation on regulation and other issues, this will have a negative impact on the economy and jobs.

Describing better international coordination on regulation as taking the “high road,” he said this would lead to “more jobs, higher sustainable growth and better risk management across the G20.”

“But there is another path — the low road — where trust and cooperation diminish, fragmentation hardens, capital flows are disrupted and trade and innovation are curtailed,” he said.

Carney’s comments are his first since Article 50 was triggered and spell out his view of the threats to London as a global financial district because of Brexit. He highlighted the significance of the banking industry in London and the wider U.K. and also repeated his view of its importance to the EU, describing it as “Europe’s investment banker.”

“Taking the low road would be sub-optimal for all, with fewer jobs, lower growth and higher domestic risks,” he said in the speech on Friday.

Brexit ViewU.K

Carney, who was heavily criticized by some lawmakers for Brexit remarks in 2016 seen as overly political, said that a positive U.K.-EU approach to regulation is in the U.K.’s interest. It would be “entirely consistent” with the government’s aim for a “comprehensive, bold and ambitious free-trade relationship with the EU,” he said.

The BOE also published a letter sent to the financial industry on preparation. Deputy Governor Sam Woods said all firms with cross-border activities between the U.K. and the rest of the EU must “undertake appropriate contingency planning” for Brexit.

Woods said the level of preparedness is “uneven” and may not be sufficiently tested against the worst outcomes, such as a so-called hard Brexit or no new deal being agreed at the end of the two-year exit timetable. The regulator wants banks’ “full responses” by July 14.

Given the wide range of possible outcomes, firms must have plans in place early so that they can “stand ready to execute in good time should the need arise,” Woods said in the letter.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

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Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.

OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.

Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”

Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.

Experts have started predicting $75 a barrel by April.

“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”

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Gold

Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin

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Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges

Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.

The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.

The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.

We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.

Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.

Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.

In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.

The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.

 

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Crude Oil

Oil Prices Extend Gains to $64.32 Ahead of OPEC+ Meeting

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Oil Prices Rise to $64.32 Amid Expected Output Extension

Oil prices extended gains during the early hours of Thursday trading session amid the possibility that OPEC+ producers might not increase output at a key meeting scheduled for later in the day and the drop in U.S refining.

Brent crude oil, against which Nigeria oil is priced, gained 0.4 percent or 27 cents to $64.32 per barrel as at 7:32 am Nigerian time on Thursday. While the U.S West Texas Intermediate gained 19 cents or 0.3 percent to $61.47 a barrel.

“Prices hinge on Russia’s and Saudi Arabia’s preference to add more crude oil production,” said Stephen Innes, global market strategist at Axi. “Perhaps more interesting is the lack of U.S. shale response to the higher crude oil prices, which is favourable for higher prices.”

The Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, are looking to extend production cuts into April against expected output increase due to the fragile state of the global oil market.

Oil traders and businesses had been expecting the oil cartel to ease production by around 500,000 barrels per day since January 2021 but because of the coronavirus risk and rising global uncertainties, OPEC+ was forced to role-over production cuts until March. Experts now expect that this could be extended to April given the global situation.

“OPEC+ is currently meeting to discuss its current supply agreement. This raised the spectre of a rollover in supply cuts, which also buoyed the market,” ANZ said in a report.

Meanwhile, U.S crude oil inventories rose by more than a record 21 million barrels last week as refining plunged to a record-low amid Texas weather that knocked out power from homes.

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