JPY

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 the market yet again flooded by comments regarding the Euro debt crisis story,

that still continues and shows no sign of reaching a near term conclusion. Italy took centre

stage under the spotlight as overnight leading credit rating agency S&P, proceed to

downgrade the country’s sovereign debt rating from A+ to A.

S&P commented on their downgrade saying that it had considered the outlook for Italy’s

economy to be negative and voiced concerns regarding future growth rates following the

stringent austerity measures recently passed by the Italian government, in recent months.

Secondly, Greece come under further scrutiny as its painful debt saga continues, with

Greece policy-makers meeting with the so called “Troika” of the European Central Bank,

European commission and International Monetary Fund on Monday.

The 'Troika' are the combination of authorities who hold Greece’s fate in the palms of their

hands, so there was some relief when Greek officials described Monday’s meeting with ECB,

EC and IMF officials as ‘productive’. Talks continued over the course of Tuesday, and a

decision has yet to be reached.

Global stock markets lost considerable ground on Monday, with rumours of an imminent

Greek debt default failing to dissipate. The US Dollar continued to be the main beneficiary as

appetite for risk drained from the market, taking the GBP/USD rate to a new 8-month low of

1.5633 during the afternoon’s session. The USD continued to trade within a range for the

majority of Tuesday ranging between the prices of $1.5661 and $1.5735.

Meanwhile, the Euro lost ground against most of the other sixteen most actively-traded

currencies. However, GBP/EUR failed to break last week’s 6-month high of €1.1724, in spite

of all of the Euro-negative sentiment in the market. Instead the currency pair continues to

trade in a fairly tight trading range varying from lows of €1.1444 to a high of €1.1522.

Today’s main headline data is the release of the Bank of Engalnd rate policy meeting minutes which may

show the willingness for further expansion to our asset purchasing programme to offset the

shrinking fiscal policy measures undertaken through government austerity. There is also the

FOMC statement that is due to be released at 7.15pm (UK time) again the markets are

paying particular attention to the mention of further Quantitative Easing moving forward.

IN THE UK

• Bank of England minutes flag chances of more QE, possibly as soon as Oct.
• Sterling hits 8 month low against USD (1.5578) & 2 ½ year low against JPY 119.
• Worries continue about the UK economy with public finance data being weak.
• UK Govt net debt stands at 61.4% of annual economic output, up from 55.3% last year.
• GBPEUR range bound trading yesterday although we did briefly touch 1.1380 when the euro staged a small comeback to 1.1430 this morning.
• GBP/USD falls again,  1.5650 broken, 1.5550 broken, currently at 1.5450. Next stop 1.5350 and it that is broken?

ELSEWHERE

• During yesterday’s London session US Home Sales Data gives the dollars a boost as the numbers released surprised the forecasts, (a rise of 7.7 %).
• Greek debt crisis continues to unsettle markets with major exchanges sliding in early trading.  Germany’s Dax & France’s Cac 40 fell 1%, doubts still remain over the €8bn aid package for Greece as Debt inspectors from the EC, ECB & IMF gear up for their visit to Athens.
• Main news overnight is later on after the London close, the USD strengthened sharply as the FOMC announcement last night revealed the more USD friendly “operation twist” was to be put into place.
• Risk appetite may now be dependent on some good news from Europe. Certainly delivery of the next Greek bailout tranche would be welcome, but there likely won't be a decision until the EcoFin on Oct 3. If the next tranche is approved then the prospect of an imminent Greek default is taken off the table, at least for the next three months, but possibly much longer.
• NZD hit  by weaker than expected Q2 GDP.
• EUR/USD traded lower following the FOMC announcement touching the very bottom of the range that I mentioned yesterday (1.35). If we don’t break this number then I wont rule out a bounce back up to 1.37.
• The Canadian Dollar Ignored a higher inflation reading and followed the risk trends causing more than a cent and a half weakness. 

DATA TO LOOK OUT FOR

• Swiss ZEW survey is released at 10.00, after the SNB’s intervention and a weakened CHF have expectations improved for economy.
• 11.00 sees CBI Industrial Trades Survey, figure is expected to fall to -0.5% and won’t help the pound at all.
• 1.30pm Retail Sales in Canada are expected to fall and could weaken the CAD further.
• Jobless Claims, leading indicators and Housing Price Index are released this afternoon in the US, the data is expected to poor but will it have any effect on USD strength after last nights gains.
• In Europe at 3.00pm Consumer Confidence is released, with the on-going concerns over debt, confidence is expected to fall further.

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 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).

Sterling began Wednesday morning on the front foot as it briefly hit a two month high

against the Euro. Traders put this positive movement down to concerns that the European

debt crisis could creep over into larger economies such as Spain and Italy. A further

acceleration against the single currency was restricted by a strong demand from UK

importers to purchase above the 1.15 level. Another stumbling block came in the form of

EUR/CHF strength, which derived from the Swiss National Bank announcing measures (in the

form of an interest rate cut), to slow recent appreciation in its currency.

“Sterling is essentially reacting to everything else going on…it is a play between major

currencies and is being pulled between them, said an economist at AIB

Group Treasury in Dublin.

Investors have found it hard of late to have a sustained interest in the Pound. The

International Monetary Fund commented on Monday that more quantitative easing may be

required to kick-start growth in the UK economy. This is an opinion shared by many in the

market as the disappointing data releases of late have been the norm.

The release of the PMI Services data came as a welcome relief to the recent trend of

economic information emerging out of the UK. The figure surprised analysts who had

expected a slowdown in activity. It rose to 55.4 in July from 53.9 in June (a figure above 50

indicates growth). A slight negative could be taken from a cut in jobs within the service

sector, especially as the previous two months had enjoyed an increase in employment. The

strongest increase in activity in services was seen in the Business Services and IT sectors

whereas hotels, catering and restaurants saw their growth slow.

“Yet again it’s the segments most exposed to consumers’ lack of disposable income that

suffered most, and all businesses are being hit by inflation and rising utility bills,” said the Chartered Institute of Purchasing and supply.

The Pound reacted positively to the data release, most notably against the U.S. Dollar. With

only a few minutes remaining before the close of the day, GBP/USD had hit a high of

$1.6474, a fingertip away from a two month high of $1.6477 (achieved earlier in the week).

The Greenback was pushed in all directions by the release of both positive and negative

economic data. MBA Mortgage Applications were seen as a positive as was the ADP

Employment Change. The negatives arrived in the form of a fall of 0.4% in the Factory

Orders and a change of 1.3M in EIA Crude Oil Stocks. A sigh of relief was heard across the

pond as President Barack Obama signed legislation to increase the US debt ceiling, thus

averting a financial default. It raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn and

makes savings of at least $2.1tn in 10 years. The resolution of the stand-off, failed to inspire

financial markets as the Dow Jones has fallen consistently for eight straight days. Credit

rating agency Moodys reacted by placing the US’s credit score as under a negative outlook.

The market will now look to the unemployment figures released out of the States on Friday

as an indication for near-term Dollar movement.

IN THE UK

• PMI Services data unexpectedly shows UK services sector grew last month and is at 4 month high. Growth is  seen in the Business Services & IT, whilst a fall recorded in the hotels and restaurant sector
• GBP/USD rises to 8 week high at 1.6405 whilst GBP/EUR falls, but still close to earlier 2 month high.
• Pound jumps vs. Swiss Franc after SNB interest rate announcement.
• The pound remains over comfortably over 1.50 against the strong AUD just breaking the 1.5400 mark as I type.

ELSEWHERE

• Overnight the Yen tumbles as the Japanese Government and central bank intervene to help reduce its value, currently we are seeing this working well as the yen has depreciated by over 3.0% against a number of currencies since the London market opened.
• The Bank of Japan has increased their asset purchase fund from 5 trillion Yen to 15 trillion Yen to help the economy after the recent natural disasters.
• US ISM Non Manufacturing follows the earlier release in the week and show another decline.
• The SNB have acknowledged the Swiss Franc is uncomfortably high and drop their interest rates to 0.25% to help weaken the currency. This morning it appears to have worked to some degree.
• Purchasing Manager Index Services (Jul) from Germany saw a retreat to 52.9 from the 56.7 seen in June.  
• The Euro found some unusual support from the Swiss National Bank, as appetite increased off the back of the rate cut announcement.
• Dow Jones down for eight straight days.

DATA TO LOOK OUT FOR

• Headline data today is the release of the both the BoE’s and ECB’s interest rate decision meeting results. Both central banks are expected to leave rates on hold at their respective 0.5% and 1.5% but rumours have been circulating about the slim possibility the UK may increase their quantitative easing package from its current £200bn, the markets have not priced in this in and if it does transpire the pound will sustain heavy losses, however the chances are very low.
• ECB Press Conference held by Jean Claude Trichet after the ECB rate decision may reveal some surprises to Eurozone policy.
• At 1.30pm US Continuing and Initial Jobless claims are released. Both figures may help to reveal how tomorrow far more important Non Farm Payrolls release may go.  

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).

A very volatile close to the week last week began on Thursday when many traders cut long positions as the bank of England decided not to raise interest rates, although the Bank of England were widely expected to keep rates on hold, there was a small chance and some traders had been positioned for an early rate hike.

Looking ahead, the markets are now only pricing a 50% chance of a rate hike in May and although it had been priced in fully for June, before Thursday’s decision, this has now been pushed back and a hike is fully priced into the market for August.

This was followed on Friday morning by the earth quake in Japan. This terrible natural disaster has been reflected in the currency markets by investors moving away from higher risk currencies and seeking out safe haven currencies, this inevitably leads to sterling losing further ground.

The gains that the Euro had already seen against sterling were given an extra boost on Friday, driving it another 0.5% higher to 1.1568, following comments from Jean Claude Trichet that the ECB may push Euro zone interest rates up as soon as April.

The markets widely expect a break through 1.1560 to lead to a test of the next resistance level of 1.1531.

Against the US dollar sterling has also struggled, only a week ago sterling was testing a new one year high of 1.6344, however over the course of last week and due to all the factors that have also driven sterling down against the Euro sterling was driven down to a 3 week low of 1.5977 on Friday afternoon before recovering to close the day at around 1.6030 avoiding a close under 1.60.

Data on Friday showed that British factory gate inflation rose to its highest annual rate in more than two years in February, led by surging oil and food prices. However, a dip in core output price inflation, which excludes volatile factors such as oil and food, eased some concerns about rising inflationary pressures.

Also on Friday mortgage lending fell more than expected in January due to "an unusual combination of factors", according to new data from the Council of Mortgage Lenders (CML).

The number of loans for home purchases fell to 28,500, 29% lower than December. While the CML says a fall over the New Year period is usually expected, "a decrease of this magnitude is greater than seasonal factors alone would explain."

With a lot of uncertainty in the markets continuing and the situation and damage in Japan still not clear, don’t be surprised to see a week of volatility ahead in the currency markets

IN THE UK

• Markets believe a rise in UK interest rates has now be pushed back and are pricing in August as the earliest.
• Sterling hits 3 week low vs USD of $1.5977 but recovers to close above $1.60.
• Mortgage lending falls compounding misery in the UK housing market.

ELSEWHERE

• The disaster in Japan obviously dominates the international news, investors watch as Nikkei falls 6.8%
• Japanese yen struggles in wake of earthquake, with high volatility likely moving forward
• Bank of Japan leaves interest rates at 0.1% and due to meet this morning to discuss ways of keeping the economy stable.
• This includes a record 15 trillion yen, roughly $200bn pumped into the economy and asset buying could increase to 10 trillion yen
• Euro zone leaders decide to increase lending capacity of EFSF to its full €440bn.
• Irish stress tests show a €25bn discrepancy in Irish banks books
• Eyes are focused on Portugal, no bailout announced but many feel it’s just a matter of time.

DATA TO LOOK OUT FOR

• Very little in scheduled announcements but markets will follow decisions made in Japan to help the public/industries effected.
• Euro Zone Industrial Production released this morning is expected rise to 0.4% and could help the euro continue recent rally

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.