CHF

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

• Although data recorded a drop in UK retail sales of 0.4% in November, they posted a three month gain of 0.7%, the strongest such gain since August 2010. Across the day, GBP enjoyed a rally to a high of $1.5529 against the dollar belying the ongoing weakness perceived in the British economy.
• While private consumption continues to stall, the BoE will surely see a growing case for expansion of its monetary policy and the minutes of the most recent policy meeting, due out next week, suggest a growing pessimism regarding the economy, expectation for further QE will surely increase.
• Christian Noyer, head of Bank of France, caused a stir by claiming that the UK should have its credit rating cut from the prestigious AAA before France given the relative deficits, debt, inflation and growth.
• GBP/EUR fell from highs of 1.1939 to 1.1868 and back before consolidating between 1.1910 and 1.1920 where it seemed to settle throughout US and Asian trading. 

ELSEWHERE

• Despite the ECB’s monthly report insisting the euro is still under considerable pressure, Spain’s treasury sold €6bn medium and long term bonds, surpassing a target of €3.5bn while 5yr bonds were at an average yield of 4.02%, down sharply from 5.27% last month and 10 year bonds boasted a yield of 5.54% compared to 6.97% last month. Importantly, some consider the stark improvement an indication of ECB involvement in the secondary bond market and therefore somewhat artificial.
• SNB announced their decision to maintain a EUR/CHF floor at 1.2000 with ‘utmost determination’. The intention to maintain the peg which was established on September 6 saw the franc rise 1.2% against the euro to CHF 1.2229 – a six week high.
• This was compounded by the SNB also deciding to keep its key refinancing rate close to zero while Swiss industrial production data recorded a greater than expected decline in the third quarter.
• Manufacturing activity across the Eurozone posted a surprise increase for December although the figure, 46.9, is the fourth consecutive month where the published figure has come in at less than 50, which shows growth or contraction.
• Consumer price inflation remained unchanged at an annualised rate of 3%, in line with consensus.
• Further developments to the European crisis resolutions saw Russia commit EUR10B to the IMF but a dent to plans for longer-term refinancing operations came as bankers seem unlikely to buy more sovereign debt using the 3 year loans available from the ECB from next week
• EFSF have been accused, in some circles, of irresponsibility as the draft prospectus for the latest bailout instruments cites “Risks arising from a Reference Sovereign ceasing to use the euro as its lawful currency...or the cessation of the euro as a lawful currency” as part of four pages of potential risks.
• A short term correction in the major currencies saw the greenback cede gains, which reached as low as $1.2955 against the euro, as part of a rally which will hinge on Friday’s economic docket.
• Data could bolster the dollar with the headline reading for US inflation anticipated match the previous such release. Thursday’s Producer Price Inflation datum in the US matched expectation at a 0.3% rise. Such stubborn price growth and a steady increase in economic activity might hinder expectation for the FOMC to undertake another large scale asset purchase program.
• Thursday’s other data releases saw initial jobless claims fall to a three year low of 366k, according to the Department of Labor, despite predictions of a climb to 390k. The New York and Philly Fed indices of manufacturing conditions climbed to 9.5, a seven month high, and 10.3, double the expected figure, respectively. 

DATA TO LOOK OUT FOR (all times GMT)

• In a relatively quiet day for data, new ECB President Mario Draghi takes part in a panel discussion at the Banca d’Italia, in Rome.
• Eurozone Trade Balance data is released at 10.00.
• US Consumer Price Index is released at 1.30pm and expected to show inflation has remained at 3.5% annually.
• US Fed members Evans and Fisher are due to speak in Fiesole and Austin respectively this evening.

Have a great weekend.

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.

IN THE UK

• GBP/USD reaches 8 ½ month low at $1.5655
• BOE keeps interest rates on hold
• BOE keep Quantitative Easing on hold, with view for further cash injections if necessary.
• PPI Input expected at 0.7%m/m (0.1% previously)
• PPI Output expected at 0.3%m/m (0.5% previously)

IN THE US

• Further risk aversion returning to the market sees the Dollar reach 7month highs against the basket of currencies.
• Non-Farm Employment Change at 13:30 today expected at 10K (-85K previously).
• Unemployment Rate expected at 10% (10% previously)

IN THE EU

• Traders concerns over poor EU countries fiscal health
• ECB keeps interest rates on hold
• Trichets tries to smooth out concerns over Greece and Portugal deficit figure of 6%
• EUR/USD reaches 8½ month lows at $1.3650

OVERVIEW

This morning we have seen rising risk aversion return to the market on concerns over the fiscal problems in some Eurozone countries (despite Trichets comments yesterday), lifting the appeal of safe heaven currencies such as the US Dollar and Japanese Yen. This has allowed the US Dollar to see 7 month highs against the basket of currencies, and next week should prove interesting for all.

At 09.30hrs this morning the market was at GBP/EUR €1.1450; GBP/USD $1.5690; GBP/CAD $1.6840; GBP/CHF 1.6862; GBP/ZAR 12.06; GBP/JPY 144.70; EUR/USD 1.3710.

Key levels of Support and Resistance today are GBP/USD 1.5604 - 1.5780; EUR/USD 1.3630 - 1.3770; GBP/EUR 1.1390 - 1.1516

IN THE UK:

• Q4 GDP figures show growth
• UK exits recession
• Mortgage Approvals better than expected
• UK economic outlook remains uncertain

IN THE EU:

• German Business expectations look optimistic    
• Eurozone Banking sector state, weighs heavily on Euro

IN THE US:

• Consumer Confidence rises throughout January
• S&P/Case-Shiller index showed a fall in U.S. home prices.
• Chinas bank plans increase appetite for USD safehaven
• Eyes on FED Interest Rate decision tomorrow

At 9.15am this morning the markets were at, $1.6148, €1.1489, 12.3085 ZAR, 144.34 JPY, 1.7193 CAD, 1.6906 CHF, 11.7604 SEK and AUD $1.7980. EUR/USD 1.4096.