EURO WEAKENS AFTER SURPRISE ECB RATE CUT - The euro has weakened, as the European Central Bank will have expected, following a surprise interest rate cut announcement yesterday. Falling interest rates mean lower returns on assets such as euro-denominated government bonds. That affects demand for them and boosts demand for assets denominated in other currencies. Hence we have seen the euro fall against both sterling and the dollar since ECB president Mario Draghi's press conference yesterday.
John Finn, managing director of Treasury Solutions in Cork, says the main gainers of the surprise rate cut will be bank customers on tracker mortgages, and those on fixed interest rates. He says that if there are companies with debt and who are thinking of fixing interest rates, the rates are coming down with no upward pressure evident. For exporters, the euro has weakened against the dollar since the rate cut and Mr Finn says the dollar could fall back as far as $1.30 by the end of the year, while sterling is also falling.
With deposit rates coming down as interest rates fall, Mr Finn says the logical thing for people to do is to pay down their debts, although he notes that consumers with money to save usually do not have many debts. He says there is a danger that they could put their money into more risky products in search for a return. He advises consumers to be careful and to make sure they understand exactly what they are putting their money into.
The financial expert also says that another key factor facing exporters is the European Markets Instruments Regulation - he says that every foreign exchange deal that is a forward contract, from February, will have to be reported to a central area. There is no threshold and every SME and multinational will have to conform to the new regulations. He says that companies will have to do a lot more work in this area, which will place a big burden on them.
MORNING BRIEFS - Trinity College Dublin is planning a €70m business school and innovation hub. Full details will be announced by the university's provost Patrick Prendergast at the Trinity Global Graduate forum this afternoon. The innovation and entrepreneurship hub will provide space for spin out and start-up companies. It will also include a 600-seat auditorium, 'smart' classrooms and a rooftop conference room.
*** internet broadcasting network Netflix has signed a deal with Disney thought to be valued at some $100m to make four 13 part series based on a number of Marvel superheroes. Disney itself has made billions from films such as Thor, Iron Man and the Hulk but it is licensing the slightly less super Daredevil, Jessica Jones, Luke Cage and Iron Fist to Netflix. The deal expands on Netflix's growing influence as a producer of content. It began by licensing television programmes and films and broadcasting them on the web but has been relying more and more on its own content including "House of Cards" and "Orange is the new Black" to attract subscribers. Netflix recently passed 40 million subscribers worldwide. Its shares have quadrupled in value over the past year.
*** Property taxes in Ireland are among the lowest in the developed world and will still be below those paid by residents of countries such as France and the UK even after the full implementation of the local property tax next year.
This is according to a report from London-based think tank Policy Exchange. In 2011-2012 it calculates that property taxes here including stamp duty, capital gains and other levies amounted to 1.5% of annual economic output. That compares to an average of 1.8% among the 34 countries it examined. In the UK the figure is 4.1%. It is anticipated that even when homeowners pay a full year's local property tax next year property taxes here will still come in at the average 1.8% of economic output.