Politics

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

IN THE <?xml:namespace prefix = st1 />UK

• Sterling initially rose against the euro yesterday after Greek politicians struggled to agree on bailout terms which increased concern over the sovereign debt crisis and made investors return to safe haven assets, the pound rose from the session low of €1.2033 to reach the high of €1.2099..
• Sterling initially lost ground against the US dollar in early trade but retraced its losses in the afternoon moving away from the low of $1.5729 to end the session near the high of $1.5840.
• Concern mounts that even though the UK has seen a recent run of stronger-than-expected economic data which has supported sterling, this may be not be enough to dissuade the BoE policy members from announcing an increase in QE at their monthly policy meeting on Thursday.  

ELSEWHERE

• The deadline set for the Greek government yesterday to agree terms of a second bailout was missed. They must now give a decision before Eurozone finance ministers next meet. Despite missing deadlines the euro continues to find support and a new “final” deadline still seems to be next Monday, if we don’t have progress by tomorrow a break below $1.30 against the US dollar seems likely.
• French President Sarkozy and German Chancellor Merkel presented a united front yesterday, proposing the setting up of an account for Greece’s interest payments to guarantee lenders are paid in full.
• Moody’s investor services said that the outcome of the EU summit in January failed to encourage an improved outlook for the Eurozone and highlighted the risk for contagion as the region faces additional credit rating downgrades in 2012.
• The ECB are expected to maintain a dovish stance at its monthly rate decision meeting held on Thursday as speculation mounts we may see another interest rate cut.
• A Eurozone recession could almost halve Chinese growth this year, according to the IMF Chinas economy will grow by 8.2% this year but warns a recession in the Eurozone could cut this to 4.2%. Beijing should get ready to inject billions of USD into the economy to fend off any downturn. .
• BOJ Shirakawa has commented saying that current deflation and the Yen strength are very ‘severe’ and that steady policy needs to be implemented by investigating economic conditions.
• JPY weakened for the third time in four days against the dollar and euro as government data showed Japan carried out so called stealth intervention to weaken the currency in November, Japanese Finance Minister Jun Azumi said he won’t rule out any options to curb the currencies appreciation.
• In late trade yesterday the US dollar weakened significantly, falling over a cent to 1.3136 against the euro, a fall mirrored against the pound. Reports surfaced that the US debt situation is ‘Very Serious’ and ‘Crisis Mode’ could develop quickly.
• Perhaps the most surprising news of the last 24hrs is Australian central banks decision to leave interest rates on hold at 4.25% at 3.30am (GMT) this morning. With less than ideal employment, retails sales and housing market conditions, the markets were fully expecting a drop to 4.0%. The drop never emerged and AUD has strengthened by up to 1.0% against all of the majors pairs. GBPAUD now trades at 1.4650 and AUDUSD is just under 1.08.

DATA TO LOOK OUT FOR (all times GMT)

• Another fairly quiet day of data today and markets again will be driven by developments in the Eurozone.
• Germany release industrial production at 11.00am which is expected to rise for both MoM and YoY.
• The US releases consumer credit change for December at 8pm this shows the amount of money that individuals borrow, this is expected to fall to $7.30B from $20.37b previous.
• Meanwhile, in the absence of US data today, the only key event in the US is Federal Reserve Chairman Bernanke’s testimony to the Senate Budget Committee. We expect him to maintain the Fed’s dovish tone regarding the US economic outlook, despite the stronger than expected January non-farm payrolls.  
• At 11:30pm Australia releases Westpac Consumer Confidence for February.

Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

IN THE UK

• UK house prices fell by 3.1% in November, the biggest decrease since November 2010 and caused the pound to fall against the dollar for the first time in 3 days, dropping 1% from the session high of $1.5775 to end the day’s trading near the low of $1.5612 a fresh months low.
• <?xml:namespace prefix = st1 />Sterling falls from €1.1683 against the euro to end the session near the low of €1.1572.
• UK Prime Minister David Cameron said his government will unveil a ‘massive’ credit-easing program to stimulate the ailing economy, and pledged to ‘use the strength of the government’s balance sheet to pump billions of pounds into reducing the cost of loans for small and medium sized businesses’ as the region faces an increased risk of a double-dip recession
• UK stocks drop for the 6th day yesterday amid signs US lawmakers will fail to agree on budget cuts, raising the prospect America will face another credit rating downgrade.
• This morning the pound rises from a 6 week low against the dollar before a government report that economists said will show Britain’s budget deficit narrowed in October. 

ELSEWHERE

• The Bundesbank warned of a ‘pronounced’ slowdown in the Eurozone as the central bank sees Europe’s largest economy growing 0.5% - 1.0% next year versus an initial forecasts for a 1.8% expansion in GDP, and the slowing recovery may prompt the European Central Bank to carry its easing cycle into 2012 as the region struggles to contain the sovereign debt crisis.
• The new Greek government has submitted its plans for next year's budget, promising to almost halve the deficit. Finance Minister Evangelos Venizelos predicted the deficit would fall from 9% of GDP this year to 5.4% in 2012 due to a write-off of debt held by banks.
• In late afternoon trade the euro erased early gains against the dollar and ended trade near the day’s high of 1.3537.
• US Home Sales increased to 4.97M in October and came in above market expectations.
• Japan's exports have fallen for the first time in three months, reinforcing worries that the strong yen and global debt crisis are affecting the economy.
• The Yen and US dollar rally yesterday after bets increase that US lawmakers will announce that the ‘Super Committee’ failed to agree on deficit cuts, boosting demand for safe haven currencies. This ‘risk off’ attitude has caused the Australian dollar to fall to a new five week low on reduced demand, whilst the Canadian dollar falls to its lowest level in 6 weeks against the US dollar.
• On a positive note for the US Moody’s affirmed the US’s AAA credit rating but maintained its negative outlook. 

DATA TO LOOK OUT FOR (all times GMT)

• Today the UK releases Public sector Net borrowing at 9:30am.
• Canada releases Retail sales at 13:30pm which is expected to show no changed from the previous release.
• The US GDP annualized is also released at 13:30pm these are expected to be revised down to 2.5% from 3.3% which could send investors further towards safe haven assets.
• The European Monetary Union releases Octobers Consumer Confidence which is expected to fall further to -20.
• The US also releases its November FOMC minutes at 7pm. 

Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

Sterling tried it's best to edge higher on Friday following a week of incredibly high volatility

in almost all markets last week. A more positive tone in equity markets helped sterling to

solidify towards the end of the week, however as has been the case for some time now

concerns about the health of the UK economy limited sterling’s gains.

A ban on short selling imposed by Belgium, France, Spain and Italy helped European banking

stocks to rally higher at the end of the week and due to the risk to the UK of a contagion

from exposure to the Eurozone this helped to push sterling a little higher.

Sterling finished the week trading around $1.6350 against the US dollar well within the

week’s large range from $1.6111 to $1.6478 although the ranges seem to be narrowing

slightly. GBP/USD is likely to continue to be give direction by USD due to direction for now

being driven by risk appetite.

Against the Euro sterling finished the week up a fraction just clearing a significant

benchmark at 1.1423. As we have seen in recent weeks despite the on-going problems in the

Eurozone weakness in the UK economy coupled with an exposure to the problems in the UK

banking sector is likely to limit sterling’s gains. Last week the Bank of England cut its

expectation for UK GDP growth to around 2% for the fourth quarter of 2011 having

previously forecast 2.5% by the end of the year, they also predicted a large fall in inflation.

The markets are currently predicting the Bank of England will keep interest rates on hold

until mid 2013 with another round of quantitative easing to stimulate growth in the UK

economy a very real possibility, an option which Mervyn King has never ruled out.

The slow UK economy was highlighted by large retailer John Lewis last week who reported a

1.4% fall in stores sales in the week to August 6th.

IN THE UK

• Sterling finished a very hectic and important week on the front foot despite the ongoing concerns in the UK economy.
• The pound enjoyed gains as risk aversion subsided, most notably against the Swiss franc that moved from a low of 1.16 last week to 1.30 this morning.
• GBP closes the week up vs. the US dollar but well within the weeks range at 1.635.
• The FTSE manages to finish Friday up on the day finishing off a bad week for the stock markets on a slight high.
• Rightmove survey released this morning show that UK house prices have fallen for a second month in a row, the figure applies to asking prices rather than sale prices and is said to be attributed to the recent fall in the stock market. My own thoughts are that the figures are slightly in accurate because of the school holidays.

ELSEWHERE

• US consumer sentiment falls to lowest level in recent history but in contrast July retail sales increase by 0.5%.
• The weakened consumer confidence figures combined with a more riskier approach helped EUR/USD to rise to €1.4283 with more gains this morning
• German media over the weekend spoke of the German government coming round to the idea of Eurobonds, a radical idea to help fix the Eurozone debt problems.
• Importantly in Italy, the government approve a plan to cut the budget deficit by €45.5bn by cutting government spending and increasing taxes in a bid to try to convince investors that Italy is still a safe option to invest in. Italy had been asked by the ECB’s to organise plans to reduce the deficit before agreeing to buy bonds.
• Japan’s economy contracted less than expected in Q2, Finance Minister Noda expects the economy to start expanding this quarter and also pledged to take ‘bold action’ to curb yen gains. They are weary that the global slowdown combined with the strong yen will hurt Japanese exports and subsequently the recovery.

DATA TO LOOK OUT FOR

• No significant European data released today but across the pound announcements start in the US with Empire State Manufacturing Index at 1.30pm which is expected to show a slight rise to 0.80 in August.
• New Motor Sales in released in Canada at 1.30pm, expected to show a comfortable rise to 2.4% from -6.1% previously.
• Main data today is US Net Long Term TIC Flow, the figure is significant as it corresponds to the trade deficit, given the debt problems in the US, cash flows in and out of the US are important and this month’s figure is expected to rise to $30.4bn for June.
• NAHB Housing Market Index is released at 3.00 and consensus is for the figure to remain on hold at 15

Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.