The announcement by the Federal Open Market Committee (FOMC) to hold US interest rates steady in July came as no surprise to market analysts who had felt that the threat of economic uncertainty and the imminent presidential election would prevent the Federal Reserve from making any hasty decisions to hike the rate in the short term.
Following June’s momentous referendum result, the UK is on track to leave the European Union, sparking speculation that its capital city will see an exodus of banks looking to secure their trading position within Europe.
Large US banks, including Morgan Stanley and Goldman Sachs, employ many thousands of staff in the UK, using the country as a staging point to access member states in the bloc via a trading ‘passport’. However, now that Britain’s relationship with the rest of Europe is uncertain, a number of banks are looking to review their arrangements and preparing to shift operations – in part at least – to the continent.
After a three-month trial at Southwark Crown Court in London, England, four former Barclays bankers have been handed down lengthy jail sentences for conspiring to fraudulently rig global benchmark interest rates between 2005 and 2007.
The convictions represent a significant triumph for the British Serious Fraud Office (SFO), which has been pursuing investigations into the Libor scandal for several years but has enjoyed only one other successful prosecution to six acquittals. Two further Libor-fixing cases by other former Barclays bankers are currently under investigation.
It seems certain that the UK is set on a course to leave the European Union, following a public referendum in June. Speculation is now focused on the terms of Britain’s Brexit and how its government will frame and maintain a continued relationship with its biggest trading partner as the country moves into a new phase of history.
There are only a limited number of options available. Possibly the most likely route would – ironically – be the one that bears the closest resemblance to the UK’s existing EU membership model: the ‘Norway’ option. An approach also shared by Liechtenstein and Iceland, it would involve Britain becoming part of the European Economic Area (EEA) and would confer access to the European single market.
Uncertainty about the future of the European Union is affecting economic stability across the single currency bloc. The growth outlook for the Eurozone has been downgraded by the International Monetary Fund (IMF) in the wake of the UK’s Brexit vote, with its managing director, Christine Lagarde, warning of an economic slowdown as confidence dips and markets suffer increased volatility.
GDP in the eurozone is only expected to grow by 1.6% this year, with a further drop to 1.4% in 2017, which represents a contraction from 2015’s 1.7% expansion. The IMF said this was ‘mainly due to the negative impact of the UK referendum’ and was in line with the organisation’s pre-Brexit predictions.