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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).

There was a rich vein of data on Thursday, starting with UK retail sales figures for August. The

latest Office for National Statistics showed retail sales contracted last month as sales

volumes were down 0.2%. Figures had slipped back 0.2% in July and 0.8% in June. August’s

figures had been affected by the riots that hit major cities throughout the UK the ONS said.

Rising prices meant that total value of sales in August was 4.7% higher than in August last

year, even though sales volumes were unchanged.

In a second report for the UK, Britons’ inflation expectations climbed to their highest level in

three years last month, underlying the impact soaring prices are having on households.

UK consumers questioned in August, expected prices to increase 4.2% over the next

year, the Bank of England said in a quarterly survey published in London yesterday. That’s up

from a reading of 3.9% in May.

The European Central Bank Monthly Bulletin, published one week after the September 6

decision to maintain interest rates unchanged, presented the current economic situation in

the Eurozone and the risks to price stability.

According to the official publication, inflation has remained elevated and is likely to stay

above 2% over the months ahead before declining next year. Inflation expectations in the

euro area must remain firmly anchored in line with the Governing Council’s aim of

maintaining inflation rates below, but close to, 2% over the medium term.

The pace of economic growth in the euro area decelerated in the second quarter, following

strong growth in the first quarter. Looking ahead, the Governing Council expects the euro

area economy to grow moderately,

subject to particularly high uncertainty and intensified downside risks.

The euro zone also releases the consumer price index for August, where the index expanded

by 0.2% from the previous drop of 0.6% in line with expectation, in addition, the annual

consumer price index expanded by 2.5%, in line with expectations and the previous reading.

Moreover, the core consumer price index also was unchanged in August at 1.2% in line with

expectations.

Over in the US, the consumer price index rose a seasonally adjusted 0.4% in August

while the core rate rose 0.2%, the US Labour Department said, yesterday.

The index has risen 3.8% in the last 12 months before the seasonal adjustment, the

department's Bureau of Labour Statistics said in a release. That is slightly higher than the 3.6% annual rate in July and the consensus expectation for August, which was also 3.6%.

The core inflation figure, which excludes food and energy, rose 2% on an annual basis

in August. From July, core prices rose 0.2%.

IN THE UK

Retail sales in the UK come out at -0.2%, showing a contraction in last month’s retail sales. This was mainly due to the riots that hit major cities throughout the UK but better than forecasted

• Rising prices showed the total value of sales in August was 4.7%, higher than in August last year.
• Britons’ inflation expectations climbed to their highest level in three years last month showing pressures on households on the back of soaring prices.
• UK Consumers expected prices to increase 4.2% over the next year, up from a reading of 3.9% in May
• GBPEUR hits a low of 1.13749 on the day and a high of 1.1498 whilst GBPUSD hits a low of 1.5730 and a high of 1.5868

ELSEWHERE

• Swiss Industrial Production came out at 3.6%, greater than expectation of a 3.3% reading and the Swiss Libor rate remained unchanged under 0.25% and will continue to target a 3-month Libor rate at zero
• The Eurozone core CPI for August, remained unchanged at 1.2%, in line with forecasts. The ECB Monthly Bulletin showed inflation elevated and is likely to stay above 2% over the next few months before declining next year.
• In the US, CPI rose a seasonally adjusted 0.4% in August, while the core rate rose 0.2%
• The Philly Fed Manufacturing Index actually showed an improved figure, rising to -17.5 from -30.7 last month, although economists had envisaged a rise to minus 15. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
• EUR/USD hits a low of 1.37032 and a high of 1.3957 as demand for the euro returns.

DATA TO LOOK OUT FOR

• A relatively quiet day on the data front, starting at 10.00am, with the Eurozone Trade Balance.
• Today is the first day of the ECOFIN meeting, where discussions will be made on a range of financial issues, such as euro support mechanisms and government finances. It will be very interesting to see how the market fares on the back of this.
• 1.30pm we will have the CAD Foreign Securities Purchases figure. This measures the total value of stocks, bonds and money-market assets purchased by foreigners.
• 2.00pm will see the TIC Long-Term Purchases which shows the difference in value between foreign long-term securities purchased by US citizens and US long-term securities purchased by foreigners.
• Finally at 2.55pm, we have the Preliminary UoM Consumer Sentiment, measuring the level of composite index based on surveyed consumers.

 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).

On Wednesday the UK saw the release of unemployment data which pushed Sterling into

the red across the board. The jobless total in the UK fell by 336,000 to 2.46M, in the three

months to March, matching a level not seen since September 2010. The market reacted in a

negative way towards GBP as the number was accompanied by a downward revision to

March’s numbers and those seeking jobseekers’ allowance rose by 12,400 to 1.47M for

April. The UK labour market can be seen to be stuck between a rock and a hard place. As

part of the government’s austerity measures, 330,000 public sector jobs are cut and reliance

is placed upon the private sector to help in the regeneration process. However, with the

economy showing signs of little growth and the on-going rise in energy prices, companies are

unwilling to expand their workforce.

“We believe that private sector companies will become increasingly careful in their

employment plans in the face of a struggling economy and elevated input costs,” said

the chief UK economist at HIS Global Insight.

The publication of the Bank of England’s minutes showed the committee voted 6 to 3 in

favour of keeping interest rates on hold at 0.5%. The 5th May meeting was the last

attended by Andrew Sentence, who has been the chief advocator for a rate increase over

recent times. He is to be replaced by Ben Broadbent, who is widely expected to be of the

opinion of the majority of the members. If this is the case, it could be highly likely that the

bank will likely delay any rate rise now until external pressures on prices ease off and wages

begin to grow in real terms. Once consumer demand starts showing signs of recovery and

the economy moves consistently in the right direction, the central bank can start tightening

policy without the risk of plunging the U.K. back into recession.

“ So the MPC has lost its arch-hawk, and while there are still members in favour of higher

interest rates, nobody, for now at least, seems to want to run with the monetary policy

tightening baton with the gusto that Sentence did,” said Global Insight.

GBP/USD saw a session low of 1.6104 whilst GBP/EUR hit 1.1309 on a day that saw an

overall negative view over the Pound. Opinions in the market were that this negative view

may be the shape of things to come, given the Bank of England’s interest rate policy. One scenario

shows that low interest rates will stand out in a global market where policy is being

tightened in many major economies. The pound may not be seen as attractive to investors

given a back drop of high inflation, low growth and a central bank that has chosen an

incorrect route of correction.

IN THE UK

• MPC vote 6-3 to leave interest rates on hold, rumours were running just before the announcement that Martin Weale who has previously voted for hikes was to change back to a ‘no change’ vote resulting in a 7-2 vote.
• The pound hits a low of 1.6104 against the US dollar after negative market sentiment stemming from poor unemployment figures.
• GBP finishes in the red across the board, falling 0.6% vs. euro.
• UK Nationwide Consumer confidence falls overnight to just 4 points off an all-time low and the outlook remains tough.
• This morning UK Retail Sales released match analyst’s expectation of 1.1%, factors such as good weather and royal wedding are said to have contributed. Sterling makes slight gains immediately after the announcement.  

ELSEWHERE

• Japan enters technical recession as GDP falls to -0.9% for Q1, although earthquake is partly to blame, the majority of Q1 activity was before the quake and this means that Q2 could be even worse.
• Euro finds some hesitant support despite being held back by rumours regarding Greek debt restructuring.
• US Dollar helped by market sentiment as opposed to data releases.  MBA Mortgage applications for May come in below expectation.
• European construction output falls Year on year for March, but fails to dent EUR/GBP strength.
• Higher shares & commodity prices help bolster the Euro.
• EUR/USD fails to break through key technical levels, prompting profit taking.
• In a TV report yesterday, Greece claim to have no desire to revert back to Drachma but future seems bleak as necessary rises in tax, lowered wages, increased retirement age to remain in the euro could lead the country into civil war.  
• In the US, the Fed minutes reveal no surprises, however have started planning their exit arrangements for QE2
• Strauss-Kahn resigns as head of the IMF, lots of names suggested to replace him including the UK’s Gordon Brown.  

DATA TO LOOK OUT FOR

• At 11.00am UK CBI Industrial Trends survey is published and is expected to improve to -5 from -11 last month.  
• ECB President Jean Claude Trichet speaks today at 2.00pm, markets will be monitoring his words regarding interest rates closely
• Philadelphia Fed Manufacturing Survey is released in the US at 3.00pm and serves as a useful indicator of manufacturing conditions in the US, a figure above the expected 20.0 might suggest that nationwide manufacturing is improving and would subsequently effect the outlook for the US dollar
• Negative Existing Home Sales data at 3.00pm in the US may pull back any early strength from the Greenback.  

 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.

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).

The UK pound has seen a raft of data releases over the past week, painting a picture of a

sluggish British economy. Yesterday was no different, starting with lending to British

consumers which rose less than expected in March whilst house prices fell at their fastest

pace since November, according to data from Nationwide.

The Bank of England data had showed that growth in net unsecured consumer lending slowed to 0.1

billion pounds in March, well below the 0.45 billion pound increase which had been forecast

in a poll by Reuters. Net mortgages also rose less than expected, with a 0.4 billion pound

increase. On a positive note, mortgage approvals showed 47,557 home purchases given the

go-ahead in March, the highest since November, although this was still less than economists’

predictions of 48,000.

Despite the rise in mortgage applications, sterling fell to a 13 month low against the euro. All

these factors make it pretty clear that the Bank of England will not raise interest rates later

today from its current 0.5%.

Over in Europe, the service sector companies eased off the accelerator slightly last month

but hiked up prices according to the latest business surveys to show that inflation is on the

rise. Growth, however, is coming at a cost, with firms increasingly passing rising costs of

commodity and energy prices on to customers.

“The PMI confirms that for now at least it is still pretty healthy growth in the euro zone.

They (prices) have been at high levels for some time now and that will be of a concern”, said

Capital Economics. Expansion was again dominated by Germany and France,

which practically masked the stagnation in Spain and slowing growth in Italy and Ireland.

In a separate set of data, Eurozone retail sales fell sharply in March, as consumers’ minds

were being weighed on by soaring prices and harsh austerity measures. The biggest monthly

decline in sales was in Portugal, where the government had secured a 78 billion euros

bailout on Tuesday but will be expected to cut debt sharply in return.

The US dollar slid further at the beginning of New York trading on the back of a

disappointing ADP Employment change report. Expectations for the index, which measures

US private sector payrolls, was expected to show a gain of around 200K for April but instead

came in at 185K.

It will now be interesting to see how tomorrows main Employment Situation will come out,

as the ADP report is considered the “curtain opener” for this report. The ISM (Institute of

Supply Management) said its non-manufacturing purchasing manager’s index fell to 56.9 in

April, compared to a reading of 57.3 in March. Analysts had expected the index to ease up to

57.4 in April.

The New Orders Index decreased substantially by 11.4 points to 52.7 and the Employment

Index fell 1.8 points to 51.9, indicating growth in employment for the eighth consecutive

month, albeit at a slower rate. Following the release of the data, the US dollar was down

against the euro, with EUR/USD jumping to hit a fresh 17-month high of 1.4939.

IN THE UK 

• Sterling falls to 13-month low versus euro on soft UK data, hitting a low of €1.1075
• Reports suggest Bank of England could look to keep record low interest rates throughout 2011
• UK construction sector activity for April grows at slowest pace so far this year.
• Consumer lending rose less than expected in March according to Bank of England data.
• House prices fall by 0.2 percent last month, the biggest drop since November 2010 according to Nationwide and expects house prices to be flat or fall further throughout the rest of the year 

ELSEWHERE 

• Eurozone service sector growth eases but ratchets up prices and passes on to customers
• The Market Eurozone Services PMI slipped to 56.7 in April from previous month’s near 4-year high of 57.2
• Germany and France see expansion yet again, overshadowing virtual stagnation in Spain and slow growth in Italy and Ireland
• Eurozone retail sales fell sharply in March, pointing to weaker household demand
• The USD falls after disappointing ADP Employment change report, which came in at 185K, less than the expected 200K mark
• EUR/USD moves to a fresh week high of $1.4939 on the back of this report
• US ISM non-manufacturing Composite fell to 56.9 in April, compared to 57.3 in March
• Aussie dollar falls as Australian Retail Sales much lower than expected.
• Ireland stands their ground and say Corporate Tax to stay at 12.5%, but will continue to look for lower interest rate on bailout plan. 

DATA TO LOOK OUT FOR 

• 9.30am see the release of UK PMI Services; a good figure today would help to repair some of the damage done by Tues and Weds disappointing PMI Manufacturing and Construction figures.   
• 11.00 Germany factory orders are published, the figure is expected to be lower than last month at 0.4, which could affect the euro. .
• Headline date today are the BoE and ECB interest rate decisions as 12.00pm and 12.45pm respectively, The BoE are expected to leave policy unchanged with rates staying at 0.5%. Slightly different consensus in the Eurozone camp, although rates are expected to stay at 1.25% after last month’s rise, there is a small chance of a rise today, but the subsequent press conference at 1.30pm is more likely to reveal plans for a rise in June.
• Fed’s Bernanke speaks later today, after his dovish comments last month the tone of this meeting is unlikely to be upbeat.  

 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.