Standard & Poor

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 gained against a broadly weaker euro on Monday, ahead of an EU summit in Brussels, with investors cautious as talks continued between Greece and private creditors on a debt swap deal.  The pound pushed up from a day low 1.1901 to a day high 1.1974.
• Sterling fell against the dollar, tracking falls in EURUSD after a run of gains that have taken the pound above $1.57 from below $1.54 in mid-January. Traders and analysts saw levels above $1.57 as a good opportunity to take profit on those gains, which sterling fall to a day low 1.5654. 
• Sterling may come under pressure later this week if purchasing managers' surveys (PMIs) for January on the manufacturing, construction and services sectors add to the picture of a weakening economy and increase the prospect of more monetary easing from the Bank of England.
• Overnight GFK Consumer confidence gave Sterling a boost, as the figure showed an improvement to -29 in December, from -33 in November.  Sterling moved up from 1.5700 to 1.5774, its highest since November 21st after the data release.

ELSEWHERE

• EU chiefs arrived in Brussels yesterday to put the finishing touches on a German-led deficit-control treaty and to endorse the statutes of a 500 billion-euro ($656 billion) rescue fund to be set up this year.
• European finance officials began discussions on Sunday that a deal that Greece and its private creditors expect to complete in the coming days, after bondholders signalled they would accept government demands for a bigger cut in their debt holdings.
• European leaders failed to finalise Greece’s second aid programme because talks with banks over debt reduction aren’t completed, German Chancellor Angela Merkel said.  The Euro fell from a day high 1.3185  to 1.3076 against the dollar as investors sought safe haven currencies
• German Consumer Price Index figure for January showed a negative figure compared to December.  The -0.4% was down from 0.7% in December, but was slightly better than the estimated -0.5% expected.
• This morning German retail sales were significantly down, the figure was expected to be a positive 0.8%, however Decembers figure showed a -1.4% decline which was worse than the -1% recorded in November.
• US stocks fell, sending the Standard & Poor’s 500 Index lower for a third day, as European leaders sparred with Greece over a second rescue program.  Some investors believe “The question isn’t whether or not Europe goes into a recession, but how deep that recession is going to be,”
• An index of executive and consumer sentiment in the 17- nation euro area rose to 93.4 from a revised 92.8 in December, the European Commission in Brussels said today. That’s the first increase since February 2011, though it’s less than the median prediction of 93.8.
• The yen strengthened against all of its major counterparts as concern increased Greek bailout negotiations will hinder efforts to resolve the financial crisis, boosting demand for haven assets.  The yen appreciated 1.2 percent to 100.15 per euro at 10:08 a.m. in New York and touched 99.99, the lowest level since Jan. 23.

DATA TO LOOK OUT FOR (all times GMT)

• At 10.00am European Unemployment rate is expected to show a slight increase from 10.3% in November to 10.4% in December.
• At 3.00pm US Consumer Confidence figures for January are expected to show an improvement from 64.5 in December to 68.0

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 the ultimate question of quantitative easing has almost certainly progressed from an

“if” to a “when” and so far expectations are of October or November. Such announcements

have, in the past, had significant detriment to the Sterling and the market appears to be

expecting the same this time. It is feasible, however that the market has already adjusted for the

rude surprise. This “clenched” reaction is certainly what we saw when Ms Merkel won a not dissimilar

vote in the German Parliament last Friday. Optimists will look at the positive PMI

(manufacturing) data from September as an adequate reason to hold off on QE and certainly the

first glimpse of growth in 3 months is not to be ignored. Everybody else, however is likely to

identify this as the catching up of backlog.

GBP/USD

Cable was nothing short of a rollercoaster yesterday with drop offs of 50, 43 and 69 pips.

Session high of 1.5573 and low of 1.5423, trading range of 150 pips and -1%. The US was

strengthened off the back of positive growth in the manufacturing industry, revealed by

September’s ISM report. However this 1% Month on month gain could only have had a nominal

contribution to the performance of the cross.

In Europe the single currency resumed its downward spiral on all fronts yesterday as fears of a

Greek default edge ever closer to materiality. This itself will not be news to many and alone

would not account for the currency’s performance today. What has changed is the market’s

faith in the remaining nations to be able to survive the default. A symptom of this is the credit

review of Franco-Belgian bank, Dexia by Moody’s. Although the officially reason is given as

“worsening funding conditions in the wider market” the bank’s €3.4bn Greek exposure cannot

be ignored.

GBP/EUR

Few will have foreseen the extent of the Euro’s fall off against Sterling yesterday. A splash-dash

23 pip recovery early this afternoon was likely a knee jerk reaction to the 32 pip drop seen just

minutes earlier. Sterling closed the session at a high of 1.1717 from a low of 1.1612. Analysts

will be ringing alarm bells as the cross approaches the 1.1723 mark, a high not seen since March

3rd 2011.

USD/EUR

A similar picture was painted against the US Dollar today. A dramatic 100 pip free-fall around

lunchtime was dwarfed only by the session’s trading range which saw a 195 pip fall out against

the session high of 1.3381 – the session low touching 1.3186 and closing just a shade above.

IN THE UK

• UK PMI Manufacturing data from September offers the first glimpse of growth in 3 months and the pound post gains against the euro breaching the €1.16 mark with further gains overnight, fast approaching €1.1723 a rate last seen in March 3^rd
• GBPUSD reached a high of 1.5573, session low of 1.5423 and a trading range of 150 pips – dropping -1% through the course of the session.
• Standard & Poor’s today maintained the UK’s AAA debt rating.
• UK Chancellor, George Osborne, has pledged to stick to his plan to use low interest rates to trigger national growth. Families and businesses would not be able to absorb the extra costs of increase in loan and mortgage repayments.
• The FTSE opens on the back foot this morning and falls below 5000.
• UK PMI Construction is released this morning, yesterday manufacturing surprised the markets with a better than expected figure, today’s figure showed a contraction to 50.1, below the consensus of 51.7 causing sterling to lose some of this morning’s early gains.

ELSEWHERE

• The US dollar makes gains across the board as investors look for alternative safe havens, avoiding CHF,JPY and Gold.
• FT Deutschland poised the question of George Papandreou’s resignation today – there is no official comment from the office of the Greek Prime Minister.
• AUD/USD broke to one-year lows to below 0.9450.
• The EU have said Greece are in line to receive their next bailout tranche of €8bn, suggestions are that Greece have enough money to operate until November.  
• Fitch downgrade world growth forecast for 2011 to 2.6% from 3.1%, Goldman’s drop 2012 Global GDP forecast to 3.5% from 4.3%.
• RBA leave interest rates on hold as largely expected but remain ready to drop them if necessary.

DATA TO LOOK OUT FOR (all times UK BST)

• Eurozone Producer Price Index is released at 10.00am, the figures in both the annual and monthly format are expected to show a slight contraction and could put further pressure on the faltering euro.
• ECB President Trichet speaks ahead of Thursday’s ECB rate announcement, there could be some clues in speech which begins at 2.00pm
• Fed Chairman Ben Bernanke gives a press conference at 3.00pm is likely to talk about ‘Operation Twist’ and widespread global debt issues and slowing economies
• UK BRC Retail Sales Monitor is released at 00.01am and will help to give a up to date picture of UK Retail Sales

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.

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 started Monday’s trading down on the euro overnight high after UK house prices for

April revealed the biggest fall in the past 1 ½ years, this was followed by the Confederation

of British Industry lowering its economic growth estimates for the UK.

Speculation now mounts that the Bank of England may downgrade its growth forecasts on

Wednesday as the Bank of England’s quarterly inflation report is released, this will increase expectations

that the UK will not make a rate hike over the coming months. Recent softer than expected

UK data over the past few weeks may suggest the bank may be more downbeat on their

assessment of the economy’s growth.

March’s UK inflation report unexpectedly eased to 4% after 5 months of acceleration to a

more than two year high of 4.4% in February.

The pound struggled against the dollar as it fell to a 3 week low mainly following falls the

euro sustained against the greenback as a downgrade of Greece’s debt made concerns

increase over the euro zone debt woes. Greece’s credit rating was cut to B from BB- by

Standard & Poor with possibility of further reductions down the line. Greece is now currently

the lowest rated country in Europe.

Sterling reached a day’s high of €1.1427 against the euro after the earlier session low of

€1.1339. Against the dollar the pound reached a high of $1.6406 before falling to the session

low of $1.6269

The euro gained some support in the morning after Germany reported a jump in exports

which increased the case for higher interest rates in the euro zone.

IN THE UK

• Sterling reaches a session high of €1.1439 against the euro but falls to a 3 week low against the dollar of $1.6269
• Halifax survey shows UK house prices fall in April by the biggest amount in the last 1 ½ years.
• The Confederation of British Industry lowers its economic growth estimates for the UK.
• Speculation is the BoE will follow suit and revise their growth forecasts downwards tomorrow.
• On a brighter note, BRC Retail Sales rose by 5.2%, helped by the recent bank holidays 

ELSEWHERE

• Standard & Poor cut Greece’s credit rating to B from BB- with further risks of reductions down the line.
• EUR/USD drops to lows of $1.4270 after Greece’s downgrade.
• ECB members says possibly restructuring of Greek debt could bring banking system to its knees
• Germany shows a jump in exports for last month which may increase the case for another rise to euro zone interest rates.
• Recent USD gains against euro are seen more as corrections to oversold USD and changing sentiment on the euro. US unemployment and loose policy will continue to hamper USD.
• Euro long positions (transactions selling euros) rose to €18.4bn last week, the highest in 4 years and explains recent euro weakness.
• US Government debt is fast approaching its staggering predetermined limit of $14.3 trillion, USD under pressure as reserve currency.
• IMF say NZD could be overvalued by as much as 20% 

DATA TO LOOK OUT FOR

• Today there are no data releases or policy speeches scheduled for the UK.
• US Import Prices are released at 1.30pm and are expected to rise creating more inflationary 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.