Swiss Bank

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 fell against the euro on Thursday and lost gains made against the US dollar after UK PMI Manufacturing fell to 54.3 in August, below the forecasts of a downwardly revised 56.9 in July. This was the lowest level since November last year although it was still above the 50 mark that separates growth from contraction.

Britain's manufacturing sector has been expanding nicely for over a year but slowed steadily over the past four months. The PMI's new orders index, a leading indicator of activity growth, fell particularly sharply to 52 in August from 58.5 in July. That was its lowest level since June 2009 and its biggest one-month fall in more than six years.

These figures back up the view being batted around the city that Britain’s economy is starting to slow after strong growth in the second quarter. They will also support the view that UK interest rates will remain at the low of 0.5% for quite some time.

Swiss Bank UBS also warned that spending cuts and tax rises outlined by George Osborne will also dampen UK growth and told clients to sell the pound. Sterling fell on the back of this to a fresh three week low of €1.2004 against the euro, also dropping to a $1.5491 versus the US dollar.

The UK economy grew by 1.2% in the second quarter which surprised most, however general consensus was this pace will not last. This is due to large public spending cuts and continued risk aversion in global financial markets.

Elsewhere across the pond US ISM manufacturing unexpectedly rose in August, growing for a thirteenth month to 56.30 from 55.5 in July. It’s worth noting that a reading of above 50 indicates the sector is expanding. This beat market expectations that the index would decline to 52.8.

Today's ISM manufacturing report suggests that the goods-producing side of the US economy continues to expand in the third quarter of 2010 and that the pace of growth is not fading as previously expected, suggesting that the sector will continue to provide support to the economy.

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.