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 began Wednesday morning on the front foot as it briefly hit a two month high
against the Euro. Traders put this positive movement down to concerns that the European
debt crisis could creep over into larger economies such as Spain and Italy. A further
acceleration against the single currency was restricted by a strong demand from UK
importers to purchase above the 1.15 level. Another stumbling block came in the form of
EUR/CHF strength, which derived from the Swiss National Bank announcing measures (in the
form of an interest rate cut), to slow recent appreciation in its currency.
“Sterling is essentially reacting to everything else going on…it is a play between major
currencies and is being pulled between them, said an economist at AIB
Group Treasury in Dublin.
Investors have found it hard of late to have a sustained interest in the Pound. The
International Monetary Fund commented on Monday that more quantitative easing may be
required to kick-start growth in the UK economy. This is an opinion shared by many in the
market as the disappointing data releases of late have been the norm.
The release of the PMI Services data came as a welcome relief to the recent trend of
economic information emerging out of the UK. The figure surprised analysts who had
expected a slowdown in activity. It rose to 55.4 in July from 53.9 in June (a figure above 50
indicates growth). A slight negative could be taken from a cut in jobs within the service
sector, especially as the previous two months had enjoyed an increase in employment. The
strongest increase in activity in services was seen in the Business Services and IT sectors
whereas hotels, catering and restaurants saw their growth slow.
“Yet again it’s the segments most exposed to consumers’ lack of disposable income that
suffered most, and all businesses are being hit by inflation and rising utility bills,” said the Chartered Institute of Purchasing and supply.
The Pound reacted positively to the data release, most notably against the U.S. Dollar. With
only a few minutes remaining before the close of the day, GBP/USD had hit a high of
$1.6474, a fingertip away from a two month high of $1.6477 (achieved earlier in the week).
The Greenback was pushed in all directions by the release of both positive and negative
economic data. MBA Mortgage Applications were seen as a positive as was the ADP
Employment Change. The negatives arrived in the form of a fall of 0.4% in the Factory
Orders and a change of 1.3M in EIA Crude Oil Stocks. A sigh of relief was heard across the
pond as President Barack Obama signed legislation to increase the US debt ceiling, thus
averting a financial default. It raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn and
makes savings of at least $2.1tn in 10 years. The resolution of the stand-off, failed to inspire
financial markets as the Dow Jones has fallen consistently for eight straight days. Credit
rating agency Moodys reacted by placing the US’s credit score as under a negative outlook.
The market will now look to the unemployment figures released out of the States on Friday
as an indication for near-term Dollar movement.
IN THE UK
- PMI Services data unexpectedly shows UK services sector grew last month and is at 4 month high. Growth is seen in the Business Services & IT, whilst a fall recorded in the hotels and restaurant sector
- GBP/USD rises to 8 week high at 1.6405 whilst GBP/EUR falls, but still close to earlier 2 month high.
- Pound jumps vs. Swiss Franc after SNB interest rate announcement.
- The pound remains over comfortably over 1.50 against the strong AUD just breaking the 1.5400 mark as I type.
ELSEWHERE
- Overnight the Yen tumbles as the Japanese Government and central bank intervene to help reduce its value, currently we are seeing this working well as the yen has depreciated by over 3.0% against a number of currencies since the London market opened.
- The Bank of Japan has increased their asset purchase fund from 5 trillion Yen to 15 trillion Yen to help the economy after the recent natural disasters.
- US ISM Non Manufacturing follows the earlier release in the week and show another decline.
- The SNB have acknowledged the Swiss Franc is uncomfortably high and drop their interest rates to 0.25% to help weaken the currency. This morning it appears to have worked to some degree.
- Purchasing Manager Index Services (Jul) from Germany saw a retreat to 52.9 from the 56.7 seen in June.
- The Euro found some unusual support from the Swiss National Bank, as appetite increased off the back of the rate cut announcement.
- Dow Jones down for eight straight days.
DATA TO LOOK OUT FOR
- Headline data today is the release of the both the BoE’s and ECB’s interest rate decision meeting results. Both central banks are expected to leave rates on hold at their respective 0.5% and 1.5% but rumours have been circulating about the slim possibility the UK may increase their quantitative easing package from its current £200bn, the markets have not priced in this in and if it does transpire the pound will sustain heavy losses, however the chances are very low.
- ECB Press Conference held by Jean Claude Trichet after the ECB rate decision may reveal some surprises to Eurozone policy.
- At 1.30pm US Continuing and Initial Jobless claims are released. Both figures may help to reveal how tomorrow far more important Non Farm Payrolls release may go.
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Current Spot Rates (9.30am)
4th August 2011 |
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USD |
EUR |
AUD |
CAD |
CHF |
DKK |
NOK |
HKD |
SEK |
ZAR |
JPY |
|
GBP |
1.6357 |
1.1472 |
1.5374 |
1.5824 |
1.2729 |
8.5442 |
8.8263 |
12.7580 |
10.46 |
11.12 |
130.678 |
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USD |
|
1.4262 |
0.9399 |
0.9674 |
0.7782 |
5.2236 |
5.3960 |
7.80 |
6.39 |
6.80 |
79.891 |
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EUR |
0.7012 |
|
1.3401 |
1.3794 |
1.1096 |
7.4479 |
7.6938 |
11.12 |
9.12 |
9.69 |
113.910 |
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.
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