UK

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).

Tuesday saw sterling fall to its lowest level in 13 months against the dollar and came under

attack against the euro, after the release of weak UK construction data added further

speculation that the Bank of England may be pushed further towards more quantitative

easing.

The pound also came under pressure along with other riskier assets and higher yielding

currencies as increasing problems with growth funding weighed down on the banking sector

with some European banks under intense selling pressure due to the exposure to the Greek

debt crisis.

The UK Construction headline activity index fell sharply to 50.1 in September from 52.6 in

August, its lowest reading in 10 months and weaker than forecasts of a 51.5 drop. Sterling

hit a low of 1.5339 against the ever buoyant dollar, not far from its recent low of 1.5326

which was its lowest level since early September 2010.

“A break below the 1.5320/25 level should see some more sell-stops being triggered

dragging it lower” said a forex trader at ETX capital. “Sterling is looking

very heavy going into the Bank of England decision on Thursday”

Earlier in the morning some traders were saying there was an interest in buying sterling at

the 1.5400/10 from Eastern European names and Sian sovereigns. Sentiment towards

sterling has taken a down turn in recent weeks on expectations more QE may be needed to

revive the flagging economy. Another round would flood the market with the UK currency,

reducing its demand.

Late in afternoon trading we saw the Euro strengthen across the board as Federal Reserve

Chairman Ben Bernanke warned of continued strain on the U.S economy and noted the

negative impact of elevated volatility and risk aversion in the financial market during

testimony before a joint committee of Congress. As a result of these comments we saw

GBP/EUR fall to hit a low of 1.1575, and EUR/USD rally 1.33.

IN THE UK

• GBP/USD falls to a near 13 month low, hitting a low of 1.5339 but recovers in the afternoon trading above the $1.5400 level
• UK Construction PMI falls sharply to 50.1 in September much lower than the 51.5 drop forecasted and disappoints the markets after Monday’s surprise rise in Manufacturing.
• After the release of weak UK construction data, renewed speculation of further QE, causes sterling to fall across the board
• GBP/EUR moves from 1.1717 hit overnight to fall a low of 1.1565.
• UK PMI Services just released shows another surprise rise, 52.9 instead of the expected fall to 50.7, sterling moves up off session lows to $1.5447 and €1.1617
• Final print of UK Q2 GDP reports an downwards revision to 0.1% from the previously released 0.2%

ELSEWHERE

• USD falls across the board after Fed Chairman Ben Bernanke’s speech last night, he warns congress of more sluggish jobs data ahead, causing EUR/USD to hit 1.33
• US factory orders dip 0.2% in August
• Eurozone producer prices fall 0.1% in August
• EUR/CHF spikes above 1.22, its highest level in almost 2 weeks, there is talk circulating that the SNB may raise the EURCHF lower limit to 1.3000
• Italy downgraded by Moody’s by 3 notches, follows S+P’s downgrade last month, this has little effect on euro strength.
• European Finance Minister says that Eurozone nations intend to support their banks as current events show the danger of banking sector troubles escalating. Belgium Prime Minister says that investors and savers need not to worry as no one will lose a single cent over the Dexia problems.

DATA TO LOOK OUT FOR (all times UK BST)

• Eurozone GDP is released at 10.00am, the previous release was 2.5%
• Also at 10.00am Eurozone retail sales are released, expected to fall in August to -0.2%
• At 1.15pm ADP Employment Change is released in the US, will provide investors with a idea of what Friday’s more important Nonfarm Payrolls might be look like. A fall to 75k is expected from 91k last month.
• 3.00pm ISM Non Manufacturing figures are released.

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.

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.  

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.

Sterling rose yesterday making up some of its recent losses against the dollar after investors bought back the currency after the view was it had been oversold on Tuesday. It reached a session high of $1.4605 up from the day’s low of $1.4397 after some risk appetite returned to the market.

Sterling suffered on Tuesday after ratings agency Fitch highlighted Britain’s fiscal deficit and mentioned Britain will face an uphill battle to reduce government borrowing and they would need an ambitious plan to reduce the deficit that currently stands at 11% of economic output. All eyes will now be focused on the upcoming emergency budget on the 22^nd of June which if shows clear plans to tackle the deficit could give support for the pound as it may improve demand for UK assets

The UK’s trade deficit widened in April as both imports and exports were affected by the recent volcanic ash eruption which grounded flights in and out of the UK for 6 days. The trade deficit in goods and services was £3.3bn in April which was an increase on the previous month’s revised figure of £3.2bn. The goods deficit also rose from £7.26bn to £7.28bn with exports falling 0.6% and imports falling 0.4%. Obviously these figures have not been read too much into by investors as sterling made gains throughout the day.

Elsewhere the euro managed to make up some gains against the dollar moving away from its recent four year low as it reached a session high of 1.2072 up from the day’s low of 1.1924. This gave the pound some support against the dollar but did little to extend any further gains against the euro. Concern that the euro zone debt crisis will have an impact against growth meant the euro continued to be the weakest currency.

There are some significant data releases across the world today most notably we have the Bank of England interest rate decision with many economists believing it will be held at the current level of 0.5%. In the US we will see trade balance and jobless data. Finally in the euro zone Germany will release consumer price index with the European monetary union giving their interest rate decision which will be followed by Trichets speech.

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.