Blogs

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.

Risk aversion seems to have returned to upset sterling’s progress, as yesterday saw a whitewash for sterling as it fell across the board.

Concerns regarding the global economic outlook caused investors to opt out of currencies perceived to be high risk, and invest in safe havens of the JPY and USD.

Investor worries are that the concerns over the U.S. economy could stall the global recovery, damaging stock prices and lifting the dollar, yen and Swiss franc. At around 10.30am sterling had moved down around 0.3% to $1.5414, below its 200 day moving average of $1.5469 and close to a 5 week low $1.5373.

Sterling had had some support earlier in the session as mortgage approvals data came in at 48.7k for July, not quite as good as Junes figures but slightly up on estimations of 46.5k. Net consumer credit also showed a positive as it moved from -0.1bn in June, to a positive 0.2bn in July, estimations were at 0.0bil.

However this was not enough to support sterling as risk aversion kicked in and the morning session losses continued. Against the Euro sterling initially dropped to an 11 day low €1.2140, but further risk pushed it down to as low as €1.2061.

Although the UK has produced some positive data including strong 2nd quarter GDP figures investors worry that the economy could be vulnerable as public spending is cut, the U.S. slowdown continues and the housing market is patchy.

In other news GFK / NOP’s Consumer confidence measure, released early on

Tuesday, unexpectedly improved. Another survey showed inflation expectations rose, keeping alive concerns among some Bank of England policymakers about rising price pressures.

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.

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.

We saw stronger than expected UK retail sales survey on Thursday, which had little impact on sterling as Investors cautiously await the Federal Reserve Chairman, Ben Bernanke’s speech and gross domestic product data later today.

The UK CBI survey showed UK retail sales growth at a three-year high, rising to +35 in August from +33 in July, well above forecasts of +20.

This surprisingly strong data suggests July’s surge in the official retail sales data was not a one-off and the recovery of the economy is seen to continue in the third quarter.

A surge in manufacturing and business services propelled growth to 1.1%, its fastest pace in four years.

A second reading is due today and will give a breakdown by expenditure. Societe Generale except a rise of 0.5% on the quarter after falling 0.1% quarter 1.

Sterling needs to get above the highs of this week at $1.5620 to sustain any rally, however, the pound remains vulnerable to any rise in risk aversion if investors feel that a US slowdown will mirror through to the global economy as a whole, leaving them inclined to seek the safety of the likes of the dollar and the Swiss franc. 

French president Nicolas Sarkozy, today called upon the 20  largest economies to work together in order to get the global monetary order in line.

“We must define a new framework for discussing currency movements”, Mr Sarkozy, adding that China would need to be included when talking about exchange rates, as they have accumulated huge FX reserves.

He also mentioned the need to reduce the dollars dominance as the reserve currency of choice, calling for a greater role for alternative currencies. 

Thursday also saw Gold steady on price, having hit its highest level in two months earlier in the day, after US employment data beat expectations, boosting the dollar and other risk-linked assets such as equities. 

The US Labour Department have confirmed that the number of people claiming jobless benefits for the first time fell by more than expected, taking the edge off some of the concern about the ability of the economy to generate jobs. 

Although this data provided a slight relief to the economy bulls, analysts claim that the overall macroeconomic backdrop remained uncertain enough to wet investor appetite for gold. 

Gold struck a lifetime high of $1,264.90 in June, partly due to the US economy slowdown and a cooling in several major engines of growth, such as China.

“Everybody was optimistic on the economic front back in midsummer, and hence gold was backing off as people were putting risk back on the books and unwinding safe-haven positions” said Scotia Mocatta. “That optimism has disappeared nearly as fast as it arrived. With a string of bad numbers out of the States and the Dow struggling to hold 10,000, the currency markets have become increasingly unnerved by it all” they said.

The dollar, which up until recently has acted as a refuge against volatility in other currencies, has come under pressure as cracks in the recovery of the economy have materialised.

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.

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.

Yesterday saw sterling suffer, reaching a 1 month low versus the dollar and losing some of Monday’s gains against the euro.

Martin Weale, the latest member of the Bank of England Monetary Policy Committee was mainly to blame for the pounds weakness. He mentioned in an interview with a UK newspaper that Britain faces potentially sliding back into recession, and also stated that the Central Banks growth forecast for the year may be too far-fetched.

These comments shunted the pound and saw GBP/USD fall to as low as $1.5373, its lowest since late July.

Against the euro sterling fell to as low as €1.2164, around a cent lower than when the

UK markets opened. The euro also gained around 0.3% on the day against the dollar and had reached an earlier day high of $1.2719, this was partly due to on par German GDP figures for quarter 2, as well as an unexpected increase in Eurozone Industrial New Orders which came in at 2.5%, a 1% increase on consensus.

Drastic US Existing home sales for July were also an aid for the euro. The figures showed that Home Sales were down to 3.83M units, a big spiral down from 5.26M units the previous month, and well below the 4.65M unit estimation. This indicated a -27.2% negative growth for July. This data is the sort that could lead the US into a double dip recession, as it does not support positive growth for the forthcoming months, and some investors opted out of the dollar.

Sterling gained some ground back after the data moving back towards its 200 day moving average of $1.5469, and finished up the day around 0.25% down almost 1 cent above the day’s low.

It is likely that the Bank of England will keep current interest rates at the 0.5% record low until well into 2011, which does not increase appetite for long term sterling investment and any future bearish comments from the Bank of England will add selling pressure to sterling.

Friday’s GDP revised figures will certainly be the key data for the UK this week whilst analysts still believe that the near term outlook for the euro remains bleak. 

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.