Effects of Brexit On The British Pound – Currency Update

The pound has plunged 14% against the U.S. dollar since the UK voted to leave the European Union on June 23. Since the start of the year, the pound is down about 12% and trading at its lowest levels since 1985.

The possibility of the UK experiencing negative consequences with EU relationships, as well as a lingering recession being triggered by an exit from the EU, has dampened consumer confidence throughout Britain and held back any further expansion plans for companies. Conversely, the depressed pound has made Britain a tourist destination for travelers whose currencies have risen versus the pound, such as for Americans and Canadians.

The rating agencies have all made revisions to Britain’s debt since the EU vote, including downgrades, making it more expensive for the country to borrow money.

Standard & Poor’s lowered its rating and warned that Brexit will weaken the predictability, stability and effectiveness of British policymaking and deter foreign investment in the UK. S&P said that the country’s banking system, which is a vital component of the economy, is very susceptible to EU fallout leading to more possible downgrades.

Fitch Ratings, another ratings firm, also issued a downgrade for the UK at AA, down by one notch from AA+ previously, and warned more cuts could come. The UK now has a more unfavorable rating from S&P than the U.S. S&P famously lowered the U.S. rating by one notch to AA+ in 2011, setting off financial and political disarray. The UK has the highest financing needs among all 131 countries that Fitch rates, at nearly twice the level of the U.S. and France. (Sources: S&P, Fitch, Moody’s, Reuters)

What An Olympic Gold Medal Is Actually Worth – Market Fact

Of the 78 countries that won medals in Rio, the U.S. won more Olympic medals than any other country that participated with a total of 121 medals. Of those, 46 were gold, 37 silver, and 38 bronze.

Surprisingly enough, U.S. Olympic athletes receive no formal financial support from the U.S. government. Instead, financial assistance is provided by the U.S. Olympic Committee, which is a federally chartered nonprofit entity receiving no federal funding whatsoever. Conversely, almost every other country that participated in the Rio Olympics offered government sponsored financial support. Countries such as Canada, China and the U.K. have appointed sports ministers that have dedicated resources available for Olympic athletes. Uniquely, Team USA athletes rely on the generosity of the American people to achieve their Olympic dreams. In addition to receiving a medal, the U.S. Olympic Committee also awards a cash prize along with each metal. Athletes are awarded $25,000 for gold metals, $15,000 for silver, and $10,000 for bronze. What’s interesting is that the cash prizes are worth much more than the medals themselves. Based on recent commodity prices, the value of a gold medal is about $564, silver is roughly $305, and bronze is barely worth anything. (Sources: U.S. Olympic Committee)

Credit Card Debt On The Rise – Consumer Finance

U.S. banks have ramped up lending to consumers through credit cards at the fastest pace since 2007. The industry has accumulated an additional $18 billion of credit card loans and other types of revolving credit in the past three months.

Data released by the Federal Reserve shows that the U.S. banking industry has seen credit card and other revolving loans rise at a annual rate of 7.6% in the second quarter of 2016, to $685 billion. The credit card business remains among the most profitable in banking as banks can charge much higher interest rates than other loan types, with average credit card rates between 12% and 14%.

Yet as credit card debt levels have risen, so have reserves for losses as banks anticipate delinquencies to rise. Within the past year U.S. banks have piled on about $54 billion worth of loans to consumers through credit cards, according to Federal Reserve data. Financially savvy consumers that pay their balances down each month avoid hefty interest charges, but those that don’t, known as “revolvers,” pay average rates of between 12% to 14% and significantly more if they are considered higher risk. Seven years since the recession ended, consumers who were hit hard during the financial crisis have found their credit scores improving. Bankers attribute a rise in credit card issuance to rising home prices and low unemployment. Banks are also lending more since one of the most important drivers of their profits are net interest margins, the difference between returns on assets and the cost of funds, which remain near their lowest levels in decades. The average credit limit per card for a subprime borrower is about $2,300, compared with about $11,500 for the safest customers.

Source: Federal Reserve