United Kingdom

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.   

After an unusual week which saw poor US data cause investors to opt out of the dollar and invest in currencies perceived to be more risky such as the pound and euro, Friday saw the Euro progress further across the board and sterling gain further against the dollar.

Sterling climbed to a 2-month high $1.5228 against the dollar on Friday after weak US employment data caused investors to sell off the dollar, as views that the economic recovery in the US is an unsteady one. Investors seem to have gained some confidence in sterling, since the Emergency Budget announcement last week has shown solid structure to help cut the UK’s budget deficit. These aggressive cuts and large tax hikes have also supported sterling, as they should help to protect the UK’s triple-A rating.

This puts sterling on a 4th week of consecutive gains against the dollar, and analysts expect these gains to further progress whilst the US continues to suffer, and US yields fall faster than UK ones, as it seems the US are likely to hold interest rates for longer than expected, thus making UK bonds more attractive.

The Euro which is still by many thought to be further weighed on in the medium term, has made some significantly surprising gains this week. These gains although potentially short term, came partly due to poor US data, but were also aided by euro zone funding, which has highlighted that the liquidity problems in the euro zone may not be as bad as expected. Earlier on in the week the Euro traded as low as $1.2150

USD, however by midday Friday had reached a 5-week high of $1.2610, finishing around 0.5% on the day.

"The euro has been used as a funding currency particularly on the crosses so that unwinding on the current environment when the market is questioning the global recovery process will see the euro rebound," said strategist at BNP Paribas.

Data release this week includes, Euro Zone retail sales (Monday), Euro Zone GDP figures (Wednesday), UK Industrial production and manufacturing production, as well as BoE Interest rate decision (Thursday).

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.

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 slipped a little further yesterday morning, its recent rally paused as gains made off the back of last week’s emergency budget appeared to become a little stretched.

Sterling lingered around a one and a half year high against the Euro but was unable to push on further into the €1.22’s. Traders are concerned that the UK economy is still a little fragile; this was highlighted by a slowdown in monthly house price rises in England and Wales in June according to property data company Hometrack.

Sterling also slipped against the US dollar and by 8.00am had slipped to $1.5034 close to

the day’s low.

Markets are currently in two minds regarding the future of sterling. Some in the market see the fiscal cuts as a positive as it will leave us in a much stronger position in the future, however, there are also those that think the UK’s recovery will be hampered by the measures and it will mean continued slow progress with interest rates set to be at

0.5% for the foreseeable future.

Regardless of this a definitive breach of the major resistance levels are needed in order for sterling to continue on its current good run of form.

Later in the day and into the evening sterling continued on its recent run of good form against the Euro and the US dollar following comments from Bank of England policymaker Andrew Sentence. Sentence said that drastic tax hikes and spending cuts outlined in the new coalition government's budget last week would not remove the need to start raising interest rates. He added that the fiscal plans were much as expected and did not change his view that it was time to start gradually withdrawing the extraordinary stimulus now in place.

Sterling climbed to €1.2254 in late trade against the Euro, whilst nudging a 2 month high against the US dollar of $1.5104, reaching an overnight high of $1.5120. Against the

Euro sterling hit an overnight high of €1.2325, a near 2 year high.

Some analysts said movement against the US dollar was not as significant as that against the Euro because there was still a feeling in the market that the gains since last week’s emergency budget may be a little overstretched. They also stated that uncertainty surrounding how the UK economy will be affected by the tightest budget in a generation may weigh on sterling against the dollar in the second half of 2010.

However if the gains against the US dollar may be stunted markets are not so concerned about GBP/EUR, with better fiscal conditions in the UK that the Euro zone markets feel that sterling may continue to gain against the Euro, however having seen sterling gain considerably in the last 24 hours the next 24 could possibly see limited rises.

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.