KUWAIT CITY, June 28: The General Manager of Treasury Group at NBK, Sulaiman Al-Marzouq, stated that it is difficult to predict the levels the Euro or the Pound could reach in the aftermath of the EU referendum results in the UK amid the wide fluctuations in the currency markets.
In an interview with the “Al-Arabiya” channel, Al-Marzouq explained that markets are still in shock after the unexpected results of the referendum, stressing that the biggest loser is the Sterling Pound, and to a second degree, the Euro. He added that both currencies could fall further against the US Dollar.
Al-Marzouq predicted that the Euro and Pound’s volatility will persist in the near term as the market awaits the steps the UK will take to formally initiate the exit process and negotiations. These negotiations, which could take up to two years, will define the future relation between the UK and the European Union. Moreover, Al-Marzouq noted that the possibility of another independence referendum in Scotland would add to the uncertainty and increase volatility in foreign exchange markets.
Al-Marzouq explained that there is no direct impact from the developments in Europe on regional bank’s liquidity situation, pointing out that with the exception of Kuwait, Gulf states already experience shortage of liquidity due to government debt issued over the past year to balance their budgets amid the fall in oil prices.
Regarding the possibility of a rise in funding costs, Al-Marzouq noted that “LIBOR” levels have actually dropped the day following the referendum, mainly due to the reassurances provided by central banks around the world that they are ready to take necessary actions, including cutting interest rates if required, to alleviate any funding pressure. Al-Marzouq stressed that Kuwaiti banks have adequate liquidity and are able to participate in future government bond issuances, finance development projects and satisfy private sector funding needs in the short and medium terms.