CAD

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 

·         The outstanding event of the day was a unanimous move by the central banks of the US, the UK, Switzerland, Japan, Canada and the ECB agreeing to reduce the interest rate on dollar liquidity swap lines by 50 basis points, immediately after the announcement, sterling moved higher towards a fresh weekly high of $1.5775 against the US dollar.

·         UK policy makers are becoming increasingly cautious regarding the economy as Chancellor George Osbourne insisted that current austerity measured kept the UK ahead of the curve compared to others facing threats from the Eurozone crisis.

·         Speculation mounted that the BoE will resort to a £100-150Bn extension of its asset purchase plan as Quantitative Easing is still the weapon of choice in the face of increasing likelihood of undershooting the 2% target for inflation. 

ELSEWHERE

·         The risks posed by the Eurozone crisis were epitomised by the first ever negative yield for German one year bonds, reaching a low of -0.07% as invested settled for the lesser of innumerable evils.

·         Rumours also surfaced suggesting that the ECB monetary policy meeting on December 8 could see a cut in the current 1.25% interest rates.

·         The Fed claimed the move to reduce rates on dollar swaps would “Ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”

·         The MSCI All-Country World Index climbed 3.1% by mid afternoon and of the 24 major commodities, only natural gas suffered a decline as markets reacted to the announcement on liquidity. All 16 currencies most traded against the Dollar also posted gains. The indication that central banks are willing to working together may bring some longevity to the resulting risk rally even if the effects were sudden.

·         After initially weakening as Eurofin conceded their bailout fund had been wide of the mark, the euro strengthened 1.1% against the US dollar to close the European session at $1.3465, having peaked at $1.3533 which marked the biggest intraday jump since lenders agreed a 50% write-down of Greek debt.

·         The biggest winners against the US Dollar were the Australian Dollar, which grew 2.7% to $1.0272 and the Brazilian Real, which grew 2.2% to B$1.8078. Canada’s dollar extended gains after data showed the nation’s economy grew at an annualized 3.5% in the third quarter beating the forecasted 3% and overall, the Loonie strengthened to a high of c$1.0187.

·         Early in the day S&P had cut debt ratings on lenders from BoA to Goldman Sachs to UBS but data on US business activity and employment and housing markets topped estimates.

·         The ADP Employer Services report showed companies added 206k, expected at 130k, workers in November bolstering optimism in the labour market.

·         The Chicago Purchasing Managers Index, business activity expanded at fastest pace for 7 months signalling a continuation of the factory-led expansion.

·         Pending home sales were also up, 10.4% in October, recording their biggest gain for 12 months and 5 times the forecast.

·         China contributed to risk appetite as the People’s Bank cut the reserve requirement ratio for banks by 0.5% in order to spur growth. The move shows a reversal in policy which will augment the capital by some Rmb400bn ($63bn). 

DATA TO LOOK OUT FOR (all times GMT)

·         11:30 The BoE Financial Stability Report will indicate how confident the central bank is regarding the stability of the  financial system as it stands and assess the risks it faces.

·         13:30 US Unemployment Claims are expected to number 390k. This indicator of newly unemployed is highly correlated to consumer spending and is therefore of great interest to many market participants.

·         15:00 After the Chicago index read positively yesterday, the ISM Purchase Manager’s Index, also from the States, is expected to follow suit with 

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 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).

Sterling continued on from Friday by getting a hammering in the markets, falling to multi

months lows of €1.1337 against the euro and $1.5936 against the US dollar. The outlook for

sterling this week is not positive with some disappointing figures expected.

An interesting point by a BNP Paribas researcher gives a clue for the pounds recent downfall

“Sterling's strength witnessed since January has been supported only by "nominal" and not

by "real" yields. Now as the nominal yield support vanishes, sterling has only one way to go,

and that will be down."

The euro continued to hold in the markets on the back of rumours that there will be an

interest rate hike in the near-term. All key indicators point towards this happening in the

next few months, but with the issue of European debt crisis back on the agenda we may see

this altered. In Germany Merkel’s Christian Democratic Union won only 39% of the

votes in Baden-Wuerttemberg, its worst result since 1952. This means Germany could be

faced with a hung parliament. The two opposition parties said they are willing to unite as a

coalition party, any political instability of Europe’s largest nation will affect the euro.

In the US some developments in term of monetary policy appeared on Saturday as Fed

president James Bullard said that a review of the second QE programme might be needed,

given the continued strength in the US economy. Which was further strengthen by reports

of both Pending Home Sales and Personal Expenditure rising. Pending home sales rose from

-2.8% to 2.1% and Personal Expenditure rose to 0.7% compared to previous reports 0f 0.3%.

Both of these reports boosted the Dollar in the market and allowed it to trade at low of

$1.402 against the Euro. Bullard said that it would be reasonable to ‘review QE2 in the

coming meetings... and see if we the Federal Reserve want to decide to finish the

programme or stop a little bit short’. Such comments may be somewhat premature, given

the still uncertain state of the US economy and the on-going global issues in Japan, the

Middle East and the Eurozone, but the talks have been enough to help appreciate the

greenback

The Swiss franc continues to strengthen, with the Yen being intervened with by the G7

nations to depreciate it and the US dollar being sold-off we see the Franc emerge as the safe

haven for investors.

The Canadian Dollar strengthens in the markets as crude oil rises above $103 per barrel, this

is the case with other commodity linked currencies With the CAD strengthening to $1.5594

and the AUD $ 1.5498 against sterling.

In today’s market there is a flood of data released with German CPI figures expected out at

2.1% the same as previously. GDP figures from the UK due at 1.5% worse than previous,

showing the UK economy is still under pressure and finally there is US consumer confidence

which also shows a decline from 70.6 to 66.0.

IN THE UK

• Sterling struggles throughout yesterday’s trading. Falling to a low of $1.5936 against the US dollar.
• It is now believed the Sterling’s recent strength was down to nominal trading due to possibilities of a rate hike.
• Fears of a slowdown in the growth of the UK economy send the pound down to €1.1337 against the euro.
• In the last few minutes, final print of UK 4^th quarter GDP figures stayed at -0.5% against consensus for a fall to -0.6%
• UK mortgage approvals up slightly to 46.97k, little reaction in sterling strength after the releases. 

ELSEWHERE

• Germany Merkel’s Christian Democratic Union won only 39 percent of the votes in Baden-Wuerttemberg, its worst result since 1952
• Canadian Dollar strengthens in the markets as crude oil rises above $103
• Pending home sales rose from -2.8% to 2.1% helping the US dollar to $1.402 against the Euro.
• Personal expenditure in the US rose to 0.7% compared to previous reports 0f 0.3% showing the largest economy may be growing at a healthier rate than anticipated. 

DATA TO LOOK OUT FOR

• German CPI figures expected out at 2.1% the same as previously
• US consumer confidence expected to show a decline from 70.6 to 66.0, but after the recent positive data we could see a surprise.
• Japanese Industrial Production released this evening for Feb; figure is expected to show a fall despite being before earthquake. 

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.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

IN THE UK:

• Sterling recovers some of its previous day’s losses.
• BoE member Andrew Sentance makes hawkish comments on UK inflation.
• CBI data comes in at a lower level then expected.

IN THE EU:

• Some euro zone countries offer support to the pound.
• Concern over the fiscal health of Greece weakens the euro to a 5 month low.
• German CPI comes in 0.2% below consensus

IN THE US:

• Mortgage applications & new home sales data are weaker then predictions.
• Fed interest rate decision held at 0.25%.
• Markets await durable good orders early afternoon.