BNP Paribas

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

• Britain was in the spot light on Friday as David Cameron didn’t agree to new fiscal terms at the EU summer saying he is safeguarding the UK’s banks and vowed to never join the euro. This has caused widespread disagreement within the coalition government. Nick Clegg believes the UK will be left behind and have less power with the Eurozone.
• Sterling showed little reaction to data showing record exports helped narrow Britain's trade deficit at its fastest pace since in October records began. October’s figure came in at £-7.557bn, significantly better than the previous months £-10.175BN, and much better than the consensus view £-9.500 Analysts said they remained concerned that Eurozone turmoil and weak demand at home would threaten an economic recovery in the UK.
• A choppy trading day on Friday saw GBPUSD with little change and closed of near $1.564. This morning we have seen it carry on down below the 23.6% Fibonacci retracement level of $1.5597 and currently trading at $1.5565 (December low) as investors look to at dollar as a safe haven.
• A report by the FSA says RBS gambled with its purchase of Dutch bank ABN Amro and was dragged to the brink of collapse three years ago by poor management decisions and flawed regulation and supervision.

ELSEWHERE

• Friday saw the euro swing euro back and forth after all EU nations except the UK and Hungary agreed to new fiscal ties at an emergency summit, the summit went a long way towards forging the closer economic ties needed to prevent future debt crises but markets are likely to judge it as too little and too late to solve the current one.
• EU leaders agreed stricter budget rules for the Eurozone but failed to secure changes to the EU treaty among all 27 member states. Countries also failed to reach an agreement on giving a banking license to the Eurozone's permanent bailout fund, limiting its firepower. They announced the possibility of increasing the size of the ESM above €500bn, this is due to be discussed further next March.
• The highlight for Germany was the announcement of no PSI in the ESM as a precondition, but adherence to the “well established IMF principles and practices”. Finally, discussion about an IMF provision of an additional €200b of resources is to be confirmed in the coming days.
• EURUSD initially strengthened on the news rising to $1.3425, however concerns that the agreement doesn't represent a solution to the debt crisis drove the euro back down to $1.335. Monday morning has seen the USD gains continue, current trading is $1.3307.
• Moody's downgraded its long term ratings on French banks with BNP Paribas, Credit Agricole and Societe General citing deteriorating macro fundamentals and funding issues.
• Canada recorded a surprise Trade balance deficit (-$885m vs. +vs. +$1b) in October, following a big month surprise surplus. The drop came mostly on the back of a -3% fall in exports (biggest decline in eight-months) and a +1.9% advance in imports.
• China revealed details to create Eurozone and US investment funds for a total of about $300bn. The aim is to help pump money into the Eurozone to boost returns on its foreign exchange reserves with aggressive high return investments.
• Inflation in China eased to its lowest in 14 months in November, providing ample room for the central bank to ease policies to support economic growth amid turbulence in Europe, China's biggest trading partner. Inflation eased to 4.2 percent in November from 5.5 percent in October, the National Bureau of Statistics said Friday. The rate cooled for a fourth consecutive month, after peaking at 6.5 percent in July.
• India’s industrial output shrank for the first time in 28 months, pushing stocks and the rupee lower on concern faltering growth will force the central bank to suspend its fight against the fastest inflation in BRIC nations.
• Foreign-exchange strategists are slashing their forecasts for the euro at the fastest pace this year as European Central Bank President Mario Draghi’s interest- rate cuts remove one of the currency’s pillars of support.

DATA TO LOOK OUT FOR (all times GMT)

• Markets will be waiting for further fallout from last week’s EU Summit in an otherwise fairly quiet day for data announcements.
• At 7.00pm the US monthly Budget Statement is released, the figure is expected to fall sharply to -$150bn as expenditure across Federal Entities, Disbursing Officers and Federal Reserve Banks out ways payments in.
• Japan’s Tertiary Industry Index for October is released overnight and is forecasted to show an marginal improvement.

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 or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension, 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, QROPS and now QNUPS (Qualifying non UK Pension schemes).

The pound was under pressure in yesterday morning’s trading as we saw it test a 4 month low against the euro.

The euro was given a boost by an unexpected deal to help strengthen a euro zone bailout fund. EU leaders agreed to increase the effective lending capacity of the European Stability Facility to the amount of €440 billion from around €250 billion; this enables the fund to buy bonds of struggling countries in the primary markets and thus offering a bail out option should other countries need assistance beyond Greece and Ireland. The continued hawkish stance on a rate hike which could happen as soon as next month also bolstered the single currency.

The proposed deal does increase investor confidence that the euro zone are looking to sort out any further crisis which overall will strengthen and show support to the euro.

Sterling has weakened after expectations for a Bank of England rate rise has been pushed back, initially many thought we would have the first rise in May which would offer support to the pound but this now moved back to August. The Bank of England last week held rates unchanged as it struggles with continued high inflation and faltering economic growth.

"We have raised the target for our long position to €1.1350 from €1.1574," BNP Paribas said in a note on Monday. "We expect ECB rate hike expectations to keep the medium term outlook for the EUR bullish. Meanwhile, the pound is coming under pressure as UK growth prospects deteriorate."

The pound reached a session high of €1.1576 against the euro up from the low of €1.1506.

Against the dollar sterling climbed from the low of $1.6029 to reach the high of $1.6197.

Sterling did receive some positive news in the afternoon as ratings agency Fitch confirmed the UK’s triple A sovereign rating with a stable outlook, the rating was underpinned by a high value added, wealthy and flexible economy. They also stated the legacy of the financial crisis weighed on the economic and fiscal outlook but those risks were declining.

Elsewhere the Yen made gains after Japans central bank doubled its asset buying scheme and supplied record funds to banks to increase confidence back to the economy after the devastation of a massive earthquake, tsunami and nuclear emergency.

IN THE UK

• The pound started yesterday’s trading testing a 4 month low against the euro of €1.1506.
• Sterling was given a boost in the afternoon after Fitch ratings agency confirmed the UK’s triple A sovereign rating with a stable outlook, reaching a session high of €1.1576 and $1.6197 against the dollar.

ELSEWHERE

• Japan still dominates the headlines, the yen gains after their central bank double its asset buying scheme and supply record funds to the banks to increase confidence in the economy.
• Nikkei closes down 11% after yesterday’s 6% fall
• The euro was boosted after an unexpected deal to strengthen the euro zone bail out fund, capacity increased to €440 billion from around €250 billion to help bail out countries should the crisis spread further then Greece and Ireland.
• Bahrain / Oman tensions threaten to boil over, Saudi troops enter Bahrain to protect ruling family 
• Press reports suggest foreign banks have US$2.5 trillion exposure to Greece, Ireland, Portugal and Spain
• Ireland continues to reject demands for corporation tax rise, still try to renegotiate loan 

DATA TO LOOK OUT FOR

• This morning in the UK we have house price index which is expected to show a drop to 3.5% from 3.8%.
• Nationwide Consumer Confidence in the UK is released for February at 9:30am.
• 10am sees Germany ZEW economic sentiment which is expected to increase which could give further support to an already strong euro.
• At 6.15pm the US release their interest rate decision, this is expected to show no change, it will be followed by the FOMC policy announcement.

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 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.

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.

Sterling’s recent gathering of strength ground to a halt yesterday, reversing gains made over the past few days, after more banking issues dented investor sentiment.

Britain’s banks were on the receiving end of an £800million tax bill, after the UK

Government increased the levy on banks to £2.5billion. The Bank Levy is an annual tax of 0.075% on the value of all of the debts of the UK banks (including money deposited with the banks), except that;

• Ordinary deposits covered by the UK’s deposit insurance scheme are exempt.
• The first £20bn of any bank's taxable debts is exempt
• The banks only pay half the tax rate on their long term debts

The 0.075% rate applies only from May this year. Originally, the Treasury had planned to charge a lower rate of 0.05% during 2011 but in February it changed its mind. The government thinks it will discourage banks from relying on risky forms of borrowing, which were blamed for making the 2008 crisis much more dangerous.

The bank levy announcement put the equity market under pressure and it's taken the steam out of sterling today," said a senior currency strategist at BNP Paribas.

"We think sterling's going to struggle now given the extent of the rate hikes that have been priced in. Things are swinging back to sterling reacting to more to negative news," they said.

Sterling lost around a cent against the Euro from around €1.1873 to a session low €1.1757. This comes after reaching a 2 week high €1.1918 on Monday. Against the dollar sterling fell from a day high $1.6161 to a low of around $1.6029.

The Bank of England Interest rate decision looms on Thursday, however most analysts’ views are that rates will remain where they are and the focus will be on next weeks inflation data and quarterly Bank of England inflation report for any clues to the timing of future monetary tightening. Markets are pricing in a rate hike in May, though they see an 18% chance of a hike on Thursday. This has led to a build-up of long speculative positions in the pound.

House prices in England and Wales fell in January but the pace of decline eased for

a third consecutive month. The Royal Institution of Chartered Surveyors' seasonally adjusted house price index rose to -31 from -39 in December, its highest level since July and far better than the consensus forecast of -38.

British retail sales bounced back in January after a snow-hit December, driven by discounts and a rush to beat the VAT sales tax rise in the first few days of the month.

The British Retail Consortium said like-for-like retail sales were 2.3% higher in January than a year ago, the strongest annual rate of growth since March.

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.