12th August 2010 Pension Foreign Exchange Report QROPS & QNUPS

We continue our daily look at factors affecting currencies allowing some insight into market conditions affecting exchange rates. Cash and income timing for UK Pensions and QROPS should be considered to maximise the Pension, QROPS and investment income and benefits taken.  

Investment market volatility and currency exchange remains a challenge. Things are still very volatile and we are in unique global influencing territory.  In conjunction with investment returns, currency exchange continues to concern many expats with UK Pensions, QROPS and now QNUPS.

The focus yesterday was on the Bank of England’s quarterly inflation report which revealed their forecast for inflation would fall well below its 2% target in two years time. In the near term this is due to increase as a rise in VAT due next year and higher commodity prices will push this figure up. The central bank cut its forecast for the UK economic growth for the upcoming year as there is still uncertainty about the economic outlook for the UK.

Mervyn King who is known for his dovish stance was quoted as saying "We're going through a long period of recovery that will take several years before we adjust back to anything we can call remotely normal," it was also suggested their policy decisions could still move in either direction as prospects were still highly uncertain. King said if needed the central bank will buy more assets to stimulate the economy. Analysts still believe the BoE will continue to hold interest rates at the current record low of 0.5% for some time to come but the next release of the BoE’s minutes will show whether any other committee members followed Andrew Sentence into voting for a rate increase to 0.75%.

Initial reaction after the announcement saw sterling fall most notably against the dollar as it hit a day’s low of $1.5630 against the earlier session high of $1.5861 overall a day’s loss of 1.4% the biggest day loss since mid May. This was mainly due to the inflation report but was not helped by weaker than expected jobless data in the UK. It showed the number of people claiming jobless benefit fell by 3,800 in July after a downwardly revised drop of 15,900 in June and well below the forecast of 15,000.

Overall the pound has gained 10% against the dollar after the year’s low of $1.4231 achieved on the 20th of May. This was due to the emergency budget which was put into place to cut the spiralling UK deficit. The pound has fallen over 1.6% this week alone amid increasing signs the budget cuts may dent growth for the UK.

A report on consumer confidence by Nationwide building society also showed a fall as it hit 56 in July down from 63 in June the lowest figure since May 2009.

Elsewhere the dollar made significant gains against majority of its trading pairs after the

Fed said on Tuesday it would use cash from maturing mortgage bonds to buy more government debt a small step to help an already struggling economy. It did help to boost the Greenback as risk aversion returned to the market as we saw the dollar strength by over 2% against the euro.

Sterling fared better against the euro in afternoon trading as the euro weakened to a 1 month low. The euro fell under its support level of 82.45 pence (€1.2128) with analysts predicting this may lead to further losses for the euro.

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pensions, investments, currency exchange and guidance on taxation in most popular ‘sunnier’ climates.   This with the re-assurance and security of UK authorised and regulated advice – essential tools for your security.