European central bank

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

• Britain was in the spot light on Friday as David Cameron didn’t agree to new fiscal terms at the EU summer saying he is safeguarding the UK’s banks and vowed to never join the euro. This has caused widespread disagreement within the coalition government. Nick Clegg believes the UK will be left behind and have less power with the Eurozone.
• Sterling showed little reaction to data showing record exports helped narrow Britain's trade deficit at its fastest pace since in October records began. October’s figure came in at £-7.557bn, significantly better than the previous months £-10.175BN, and much better than the consensus view £-9.500 Analysts said they remained concerned that Eurozone turmoil and weak demand at home would threaten an economic recovery in the UK.
• A choppy trading day on Friday saw GBPUSD with little change and closed of near $1.564. This morning we have seen it carry on down below the 23.6% Fibonacci retracement level of $1.5597 and currently trading at $1.5565 (December low) as investors look to at dollar as a safe haven.
• A report by the FSA says RBS gambled with its purchase of Dutch bank ABN Amro and was dragged to the brink of collapse three years ago by poor management decisions and flawed regulation and supervision.

ELSEWHERE

• Friday saw the euro swing euro back and forth after all EU nations except the UK and Hungary agreed to new fiscal ties at an emergency summit, the summit went a long way towards forging the closer economic ties needed to prevent future debt crises but markets are likely to judge it as too little and too late to solve the current one.
• EU leaders agreed stricter budget rules for the Eurozone but failed to secure changes to the EU treaty among all 27 member states. Countries also failed to reach an agreement on giving a banking license to the Eurozone's permanent bailout fund, limiting its firepower. They announced the possibility of increasing the size of the ESM above €500bn, this is due to be discussed further next March.
• The highlight for Germany was the announcement of no PSI in the ESM as a precondition, but adherence to the “well established IMF principles and practices”. Finally, discussion about an IMF provision of an additional €200b of resources is to be confirmed in the coming days.
• EURUSD initially strengthened on the news rising to $1.3425, however concerns that the agreement doesn't represent a solution to the debt crisis drove the euro back down to $1.335. Monday morning has seen the USD gains continue, current trading is $1.3307.
• Moody's downgraded its long term ratings on French banks with BNP Paribas, Credit Agricole and Societe General citing deteriorating macro fundamentals and funding issues.
• Canada recorded a surprise Trade balance deficit (-$885m vs. +vs. +$1b) in October, following a big month surprise surplus. The drop came mostly on the back of a -3% fall in exports (biggest decline in eight-months) and a +1.9% advance in imports.
• China revealed details to create Eurozone and US investment funds for a total of about $300bn. The aim is to help pump money into the Eurozone to boost returns on its foreign exchange reserves with aggressive high return investments.
• Inflation in China eased to its lowest in 14 months in November, providing ample room for the central bank to ease policies to support economic growth amid turbulence in Europe, China's biggest trading partner. Inflation eased to 4.2 percent in November from 5.5 percent in October, the National Bureau of Statistics said Friday. The rate cooled for a fourth consecutive month, after peaking at 6.5 percent in July.
• India’s industrial output shrank for the first time in 28 months, pushing stocks and the rupee lower on concern faltering growth will force the central bank to suspend its fight against the fastest inflation in BRIC nations.
• Foreign-exchange strategists are slashing their forecasts for the euro at the fastest pace this year as European Central Bank President Mario Draghi’s interest- rate cuts remove one of the currency’s pillars of support.

DATA TO LOOK OUT FOR (all times GMT)

• Markets will be waiting for further fallout from last week’s EU Summit in an otherwise fairly quiet day for data announcements.
• At 7.00pm the US monthly Budget Statement is released, the figure is expected to fall sharply to -$150bn as expenditure across Federal Entities, Disbursing Officers and Federal Reserve Banks out ways payments in.
• Japan’s Tertiary Industry Index for October is released overnight and is forecasted to show an marginal improvement.

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.

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 hit its highest level in almost eight weeks against the euro yesterday after speculation that monetary policy in the euro zone would remain looser than in Britain.

Despite making gains against the euro, the pound fell against the US dollar which took broad gains against a basket of currencies as a slide in US shares suggested the markets were moving away from risky assets.

Analysts said weekly data showing a rise in bets against the euro suggested it would remain weak versus the pound. The Bank of England looks much less likely than the ECB to loosen monetary policy given a run of strong UK economic data.

The euro fell to its weakest level since late June, with the pound rising to a session high of €1.2275 after European Central Bank Governing Council member Axel Weber said late last week the ECB should extend its loose monetary stance.

The euro did make back some of its losses later in the afternoon after a lack of follow through selling later helped push the euro off its lows, traders said demand for the single currency around the €1.2270 level was met by offers around €1.2230, helping to keep the pair within a range.

Gains against the euro helped lift the pound to a fresh one-year high against a basket of currencies and its trade weighted index rose to 83.1 early on Monday, following a climb on Friday.

Technical analysts say the next level for the pound to reach is €1.2391, this is the June high and the highest the pound has reached since November 2008. If this level is broken the flood gates may well open with the pound potentially breaking the €1.25 mark.

Against the dollar the pound was slightly lower on the day at $1.5510, pulling away from a session peak of $1.5620.

The pound was sold off along with other perceived risky currencies as US shares fell. But it managed to stay above its 200-day moving average at $1.5476, and technical analysts said trend was likely to remain upwards as long as sterling continued to close above the 200-day average mark. For it to extend gains, however, it would need to sustain a move above $1.57, something it has struggled to do in recent days.

The euro traded fairly flat on the day against the dollar, it hit a session high $1.2725 at 9.00am in London and remained within 0.3% falling only as low as €1.2661 throughout the session.

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for QROPS 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 for your security.

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.

A return of risk appetite helped the pound and the euro claw back some of their respective losses against the US dollar on Monday. The European Central Bank said it only bought minimal amounts of government bonds from the euro zone easing some of the concerns about the economic strength of some of the euro zone members. Investors took this as a healthy indication it might not all be doom and gloom in Europe and began to buy back in to riskier assets. US and European stocks rose to claw back early losses which also helped the riskier currencies make gains as many of them follow equity price fluctuations.

The pound managed to fight back from a three week low against the dollar to hit a session high of $1.5696, nearly a full one percent higher than the low of the day of $1.5555 reached as the London markets opened.

Disappointing housing data from Rightmove prevented sterling making any headway against the euro in the early part of the session. The data showed that house prices fell by 1.7% last month making it the second month in a row that prices have fallen. The pound suffered some selling pressure against the euro and fell to €1.2155 around noon after being above €1.22 before the housing data filtered through in the early hours.

The euro climbed back up to hit a session high of $1.2868 against the US dollar nearly a cent higher than its open price.

Apart from UK housing data, Monday was a fairly quiet day in terms of data announcements. From a UK point of view, the highlight of the week is on Wednesday when the minutes from this month’s Bank of England monetary policy meeting are published.

Quantitative easing was thought to be a distant memory now, but Governor Mervyn King’s statement last week shows it is still firmly on the minds of the MPC. Any comments published in the minutes about additional QE, could and probably would have a very negative impact on the pound.

Additionally the split on voting for the interest rate levels will be eagerly awaited. The main question is whether any of the other MPC members have joined Andrew Sentence’s opinion that now is the right time to start to raise rates. Many of the other members feel the UK economy is still too weak, but it is only a matter of time before other members believe the time is right.   

Reports say that from a technical point of view that the pound will remain popular with investors if it continues to stay above its 200-day moving average at $1.5504.

A fall below that level could open the door to further losses towards $1.5320, the 38.2% retracement of its recovery from a May low around $1.4230 to recent highs just shy of $1.6000.

Data shows that traders averaged out having more sterling buy positions than selling, this is the first time this has happened since mid 2008 and a clear sign that sentiment is changing to become more positive towards the pound. 

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 for your security.