Asia

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

• British Prime Minister David Cameron says that Britain will not ratify the Franco-German proposals to change the EU Treaty without safeguards for British interests and The City of London. 
• Following yesterday’s announcement that S&P have placed a further 15 of the 17 Eurozone states on a negative watch, including France and Germany, GBP/EUR moved to a rate of €1.1711. 
• In the lead up to the open of the European markets GBP/EUR trades at €1.1627 arguably on the back of support for planned changes to the EU Treaty for the United States.
• The British Retail Consortium indicate the early advent of sales on the British high street has contributed to a contraction in the pace of retail inflation.  Whilst Food price inflation remains on the up, other retail items saw a contraction by 0.1% to 2% for previous 2.1% posting.
• Josh Raymond of City Index asserts that major currency trading will remain largely headline driven until sentiment from Friday’s EU summit and minutes from BoE can be assessed fully.  GBP will benefit from a more or less coordinated effort to lower rates around the world coupled with protection of Britain’s AAA rating. 

ELSEWHERE

• The European Financial Stability Fund (EFSF) has also come under scrutiny from ratings agency Standard and Poor’s, who have warned that it could downgrade the AAA rating of the fund.
• Timothy Geithner, US Secretary of the Treasury, spoke yesterday of an emphasis on the importance of success in the EU talks, not only for the EU and US, but for the Global economy as a whole; overnight USD moved to a rate of $1.34 against EUR, but has slipped back to $1.343 following the European open.
• Analysts in Asia have warned of the immediate risk of contagion globally, and as a result many Asian economies have ‘trimmed’ their growth forecasts, but the area itself does see the potential for medium term growth on the back of an increase in demand with closure of a percentage of European export markets.
• Dutch heads of business have come out to urge EU political leaders to push forward urgently.  With over one third of their exports going to Southern European countries, fears voiced by The Netherlands place greater pressure on EU heads of state to satisfy the markets’ appetite for stability in the Eurozone.
• This morning the Secretary General of OPEC, speaking in Doha, said that he hoped the EU would not go ahead with a proposed ban on Iranian oil.  At present Iran supplies the EU with around 18% of its oil, or 450k barrels a day, and the Secretary General warns that this amount would be very hard to replace if sanctions come into place.
• Australia posts GDP figures in line with expectation at 1%, but below the 1.4% growth shown last quarter.  GBP/AUD moves from a rate of 1.5228 to 1.5182, and marginal risk appetite comes back to certain Far Eastern currencies; SGD strengthens against GBP slightly. 

DATA TO LOOK OUT FOR (all times GMT) 

• 11.00am German Industrial Production figures are released.
• MBA Mortgage Applications is released at 12.00pm in the US
• In New Zealand at 8.00pm, the RBNZ release their interest rate decision. The markets aren’t expecting any change to the current 2.5%
• Japanese Trade Balance is released overnight.

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).

Sterling was victim to yet another day’s volatile trading session yesterday, created by the

release of the Inflation report for the UK and Mervin Kings press conference held shortly

after.

In the mornings trading session we saw Sterling slide lower leading to the release of the

report at 10.30am. We saw Sterling slide against the US Dollar from a morning high of

$1.6321 to a low of $1.6228 ahead of the release even though previously on Tuesday

evening the FOMC had stated that interest rates would be kept at all-time lows for the next

2 years.

The release of the Inflation report showed that the Bank of England had cut their economic

forecast again for the UK from 1.8% growth in 2011 down to 1.4%. This is the second time

this year that they have cut rates down form their previous forecast of 2% for 2011. There

was also a statement that Inflation is expected to hit 5% this year and then it is expected to

fall rapidly in 2012. On the release of the report Sterling almost immediately retreated to

€1.1253 against the Euro and $1.6187 against the US Dollar.

"We can see a distinct weakening around the world, especially in the industrialised world,

but also in Asia is a slowing of the world economy ... These are risks we'll have to watch out

for," King said.

He said that adding to the Bank of England’s asset-buying programme would be a possibility

if the economic outlook deteriorated, but suggested that more quantitative easing may not

be imminent, further easing would be negative for the currency as it would add to Sterling

liquidity. Sterling then proceeded to claw back its losses on the release of this comment.

"The initial move was an overreaction. The slight downgrade in the forecast was not entirely

unexpected," said a currency strategist at Credit Agricole CIB.

Moving into the afternoon’s trading session we saw rumours take hold of the market once

more concerning the Euro debt story, as rumours suggested that France could possibly be

downgraded. This allowed the US Dollar to gain once more against the Euro and Sterling

posting lows of €/$ 1.4161 and £/$ 1.6120 whilst Sterling managed to recover against the

Euro to post a high of €1.1418.

IN THE UK

• Sterling posts a low of $1.6122 against the Dollar during the afternoon’s trading session, and a low of €1.1253 against the Euro – mainly fuelled by the release of our Inflation Report.
• Bank of England cut GDP forecasts further to 1.4% from 1.8%, creating Sterling weakness.
• Bank of England give no further signs of adding to our asset purchasing program.
• Adding to sterling woes were the rioting and looting which also darkened the outlook for sterling

ELSEWHERE

• Rumours spread that France is exposed to a possible downgrade in credit rating, creating Euro weakness in the afternoon’s trading session.  
• French bank shares fall in particular Soc Gen which fall over 18% yesterday but along with other French banks all open higher this morning.
• French Industrial Production month on month misses expectations massively posting a figure of -1.6% against a forecast -0.1%.
• German Final CPI month on month meets expectations posting a figure of 0.4%.
• US Wholesale Inventories month on month posts a figure of 0.6% and US Crude Oil Inventories posts a figure of -5.2M against a forecast 1.7M.
• Moody’s, S&P and Fitch all reaffirm France’s AAA rating which calms the markets for the time being.
• In Switzerland, the SNB have said they have a variety of measures to look at to weaken CHF, this morning it is off yesterday’s highs.
• Norges Bank keep Norwegian rates on hold, markets had expected a 25bps rise but as I wrote yesterday given the current climate a no change decision was quite likely.

DATA TO LOOK OUT FOR

• Australian unemployment rate expected at 4.9%
• ECB Monthly Bulletin released at 9am.
• US trade Balance expected at 13.30pm to post a figure of -47.9Bn
• US Unemployment Claims expected to post a figure of 401K at 13.30pm.

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 plummeted yesterday, as UK GDP data blew away talks of interest-rate rises by the Bank of England in the short-term future. Although the currency has performed strongly so far this year, the pound plunged to $1.5752 charting a hefty 1.6% decline from its higher point of the day, and following figures showing that the UK Economy in the last three months of 2010 had shrunk by 0.5%. This was in opposition to the expected growth of 0.5% and in comparison to the rise of 0.7% in the previous quarter.

While output in the UK was affected by seasonal factors during the fourth quarter, analysts stated that this is once again an example that developed economies continue to struggle with recovery from the financial crisis and global economic slowdown.

Mixed views on sterling’s outlook circulate the markets as sterling’s rally since mid- December appears to be over. The figures are bad news for the government which are due to implement public spending cuts in early 2011. “Whilst yesterday’s GDP figures are backward-looking, they are nevertheless crucial to understanding the resilience of the economy to shocks. It seems that the economy is incredibly vulnerable and with the fiscal tightening yet to fully bite, we will have to brace ourselves for a bumpy ride,” said economist at Daiwa Capital Markets, Europe.

This, however, presents a dilemma for the Bank of England, which now has to juggle a worrying outlook for growth combined with elevated price pressures.

There were positive signs from Europe, however, as the debut bond from the European Financial Stability Facility attracted strong demand from investors.

Demand for the bond is evidence that concerns about the fiscal and debt troubles dragging some EU member countries finally appear to be easing.

The euro strengthened to trade below €1.1625 for the first time in three weeks, hitting a low of €1.1575. Meanwhile, the euro retraced its recent gains against the Dollar as traders positioned themselves ahead of the key data releases. Markets are also on alert for the Federal Reserve interest rate policy decision due to be released today and traders will be watching for whether the Fed’s language reveals a willingness to implement changes or curtail its controversial $600 billion monetary-stimulus plan.

Although the Dollar traded higher against some Currencies, namely GBP, Euro and

AUD, its weakness against the Japanese Yen, NZD and Swiss Franc indicates that it was not the dollar dictating the flows in the foreign exchange market yesterday.

Whilst US economic data is important, it appears that the thematic trades in Europe and Asia have a significant effect on monetary policy and that the strength of US economic reports may not be enough to motivate the Federal Reserve to reduce Quantitative Easing. However the Fed, within the next couple of months, will need to decide if the asset purchase program needs to be extended beyond June.

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.