The European Commission has revised down its forecasts for growth in the euro zone and in Britain after the British vote to leave the European Union, in early estimates unveiled on Monday by the economic affairs commissioner Pierre Moscovici.
Britain will be hit harder after the June 23 vote to leave the European Union, the Commission forecast. It said the cumulative negative impact for British gross domestic product (GDP) would be between about 1 percent and 2.5 percent by 2017.
The Commission has previously forecast British economic expansion this year and next of 1.8 and 1.9 percent respectively.
The euro zone is likely to see its growth cut between 0.2 and 0.5 percent by 2017 because of the referendum vote, Moscovici said.
In May, the Commission forecast euro zone growth in 2016 of 1.6 percent and in 2017 of 1.8 percent.
The European Central Bank has estimated that Britain's vote to leave the EU could reduce euro zone growth by a cumulative 0.3 to 0.5 percent compared to previous estimates over the next three years.
On Friday, in its annual policy review of the 19-country euro currency bloc, the IMF also cut its growth forecasts for the euro zone to 1.6 percent from 1.7 percent in 2016 and to 1.4 percent from 1.7 percent in 2017.
Britain's banks are likely to welcome Theresa May as the next prime minister and will look to her to start negotiating for their continued access to the European Union's single market after the country exits the bloc.
Banks registered in the Britain are currently granted a "passport" to offer their services across the EU from their UK base, thus saving huge amounts on meeting capital requirements and other costs by not having to set up shop in each member state.
Britain has to negotiate new trading terms with Europe after it voted last month to leave the bloc, and banks like HSBC have said they would shift staff to the EU unless broad passporting rights were kept.
Some of May's Conservative Party rivals in the contest to become prime minister had said Britain should not seek continued access to the single market as this would mean accepting the freedom for EU citizens to find work in the UK.
May, who was in the pro-Remain camp, has adopted a more conciliatory stance since the referendum result and has signaled a willingness to compromise on the trade-off between single market access and curbing EU migrants.
Bank of England Governor Mark Carney faces the U.K. parliament's Treasury Select Committee from 5:00 a.m. ET tomorrow, ahead of Thursday's first post-Brexit interest rate decision for the central bank. The majority of economists surveyed by Bloomberg are expecting the monetary policy committee to cut rates for the first time since 2009 at Thursday's meeting, with most seeing a 25 basis point reduction to 0.25 percent.
Kansas City Federal Reserve President Esther George on Monday said U.S. interest rates are too low and signaled she could be ready to restart her push for rate hikes within the Fed's rate-setting committee.
"Keeping rates too low can create risks," George told a management conference in Lake Ozark, Missouri.
George, who is a voting member of the Fed's rate-setting Federal Open Market Committee this year, had dissented at the FOMC's January, March and April meetings when policymakers held rates steady.
On those occasions, she was the lone policymaker advocating rate hikes. But in June she joined the other nine members of the FOMC in supporting steady rates.
On Monday, she said her decision not to dissent owed to an unsettling sharp slowdown in hiring during May and worries around Britain's vote on its EU membership. But she also said subsequent jobs data showing a rebound in hiring in June was "welcome news," and that Britain's vote now appeared to be more a long-term rather than a short-term concern.
The yen tumbled by the most since October 2014 as Japanese Prime Minister Shinzo Abe said he planned to add fiscal stimulus following the ruling party’s victory in Sunday’s upper-house elections.
Japan’s currency weakened against all of its 31 major peers after Abe, speaking in Tokyo on Monday, repeated his pledge for action on a stimulus package. He will order measures to support domestic demand, including plans to speed up the construction of high-speed trains. Demand for haven, which has supported the yen, was curbed as U.S. equities surged to an all-time high.
Oil prices remained near two-month lows from the previous trading session on Tuesday as financial traders lost confidence in a recent price rally, switching positions in anticipation of lower prices.
International Brent crude oil futures were trading at $46.13 per barrel at 8.27 p.m. ET, down 12 cents from their last close and near to the $45.90 two-month lows reached the previous day. U.S. West Texas Intermediate (WTI) crude was down 13 cents at $44.63 a barrel.
Analysts said that prices were being pulled down by the financial players who were switching positions from betting on price rises, or long positions, to positions that would benefit from price falls, known as shorts.
Hedge funds and other money managers cut their bullish bets on crude oil by 22 million barrels over the seven days ending on July 5.
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