Bahrain

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 or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension, 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, QROPS and now QNUPS (Qualifying non UK Pension schemes).

Early trading saw GBP fall to fresh four month lows against the Euro as news from the UK and Europe helped their currencies move in opposite directions in the market. Sterling was hurt by the fact that consumer confidence in the UK fell back in January, reversing the growth that had been seen in December. The index that was released by Nationwide revealed it to be at its lowest level since November 2008, with the main contributors being an increase in VAT and continued upward inflationary pressures.

Further negative sentiment came in the form of housing sector figures which showed UK house prices fall by 1.4% between February and March. An agreement to strengthen a Euro zone debt bailout fund helped push EURGBP down to €1.1504, its lowest since November.

As the day progressed, Sterling recovered from its uncertain start as investors profit taking from the single currency’s early gains helped make up for lost ground. Euro was unable to break through the 86.90 level, reflecting market movements last seen in January this year.

Lee McDarby, Investec’s head of dealing for corporate and institutional treasury, said that some exporters were waiting for GBP to break below the 1.15 level before buying back the Pound.

“The current dip provides an excellent and unforeseen opportunity for the UK export market and we are seeing a great deal of activity today.”

Despite investors in the short term interest rate market pricing in a 25 basis point rise in July or August, GBP would receive a larger boost with the rise occurring in May.

“There will be a more bullish mood towards sterling if the Bank of England hikes rates in May, as we expect,” said a currency strategist at Barclays Capital. “MPC members are waiting for a positive growth number before they hike rates and a rate hike will be a large sterling positive.”

However, short term interest in the Pound could waiver if the European Central Bank looks to move towards a hike before the Bank of England is able to make a move.

The pound was helped against the Greenback by the ratings agency Fitch re-affirming that its credit rating was looking increasingly secure. It was further aided by the bearish news out of the U.S. in the form of the Net Long-term TIC flows where a figure of $51.5B was posted against the expected $72.3B.

European stock markets plummeted during yesterday’s session, due to fears that a rapid contraction in Japanese growth following last week’s earthquake, will affect the demand for components and products across world markets. The FTSE 100 fell by over 2% on the day while the FTSE 250 posted a 3% downturn.

IN THE UK

• DCLG House Price Index shows adjusted house sale prices in the UK fell by 0.5% in January.
• FTSE 100 drops down by over 2% joined in negative territory by a fall of nearly 3% on the FTSE 250.
• Consumer confidence in the UK fell back in January, reversing the growth that had been seen in December.
• Markets watch for a close below the €1.15 level as it would send out bearish signals for GBP/EUR

ELSEWHERE

• Radiation leaks from Japan’s Fukushima nuclear power station worry investors about Japan’s ability to recovery.
• Nikkei reverses recent losses and closes 5.86% up, Yen and Swiss franc both benefit as traders move to safe haven assets.
• Frankfurt’s DAX Index falls by almost 5%.  Germany is a key supply-chain partner for many Japanese multi-nationals.
• Rating agency Moodys downgrade Portugal to A3 from A1 because of weak growth prospects and doubts over debt recovery.
• In the US, the Fed leaves rates on hold and monetary policy lose as fears of the global headlines could affect US recovery
• Troubles in Bahrain escalate; security forces launch assault on protestors.

DATA TO LOOK OUT FOR

• This morning UK Claimant Count Rate, a figure below 4.5% would show the labour market improving and would help the pound
• UK Average Earnings and ILO Employment Rate data could also help strengthen the pound if better than expected
• Euro Zone CPI will highlight price issues, ECB President Trichet has already mentioned he is very concerned about rising prices.  
• US Housing Starts published at 12.30 will show the conditions of the troubled US housing market
• US Producer Price Index figures also released at 12.30pm

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 Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

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