Sunday Times

Continuing our daily look at factors affecting currencies allows 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 lost ground briefly yesterday after slightly weaker than expected data, but did make a recovery against the dollar after risk appetite boosted the pound.

Consumer Price Inflation figures fell in from April’s figure of 3.7%, to 3.4% in May.

The figure which was 0.1% below consensus briefly shunted sterling, as May’s figure still remains way above the Bank of England’s target rate of 2%. But the fall may ease concerns between policymakers who have scrutinised the spiralling inflation figures of recent.

Andrew Sentance, one of the hawks on the Bank of England’s nine-member Monetary Policy Committee, wrote in the Sunday Times that the resilience of inflation so far raised the issue of how long a highly expansionary monetary policy would remain appropriate.

The monetary policy will be discussed in detail over the coming months, and with the budget just around the corner, sterling could potentially be damaged in the short term.

The weak Inflation data, and speculation of a potential amendment in monetary policy initially caused sterling to fall from an overnight high of around €1.21 to a day low of €1.2002. Against the US dollar, sterling fell briefly from around $1.4760 to a day low of $1.4680.

Retail Price Index came in at 0.4%, which was 0.1% above consensus for May, and the pound later recovered as buying by European Investors increased risk appetite for Sterling.

At 3.00pm, the pound had moved to a 1 month high of $1.4835 finishing around 0.5% up on the day, and against the euro the pound made a slight recovery to around

€1.2030, but still around 0.3% down from the previous night’s haigh.

With the budget announced on 22nd June, investors will be looking for any hints as to what policies and cuts will be announced. An aggressive outlook is expected and with harsh spending cuts probable, investors worry that this could stall the growth of the economy and potentially cause a double-dip recession.

This could certainly damage sterling in the short term, more so against the US dollar as the euro is still seen as a risky currency to invest in. The eurozone economic outlook is far less positive than that of the UK’s. The budget will be to help create a stable economy and provide a steady growth for the UK, and will be adopted as medium-long term strategy.

This morning will see UK Jobless Claims for May as well as Eurozone Consumer Price Index. This afternoon will see US Producer Price Index for May.

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 to avoid the offshore casino.