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IFX Market Report for QROPS

Submitted by qrops on Mon, 10/May/2010

Currency exchange continues to concern many expats with UK Pensions and QROPS. Sterling is strengthening against the €uro bur weakening against the Dollar. The complexity for Pension and QROPS and investment strategies also needs continued monitoring of exchange rates to optimise returns.

Continuing our daily look at factors affecting currencies allows 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.

 

It's was a volatile day on Friday for the stock markets and the pound after it was confirmed that the UK has a hung parliament.

The FTSE 100 opened down 1% and the pound dropped to a one-year low against the dollar amid widespread economic and political uncertainty in both the UK and Europe. The index of leading shares later steadied 14.3 points lower at 5247.7.

Early trading saw the pound fall to below $1.45 against the dollar and down to 1.14 euro. It recovered after Liberal Democrat leader Nick Clegg said the party with the most votes and seats - the Conservatives - should have the first attempt at trying to form a government.

With the Tories unable to secure an outright majority in the House of Commons, the lack of a decisive winner will almost certainly hit investor confidence, at least in the short term.

But that is being overshadowed by the growing fears over the eurozone debt crisis, which has already hit markets across Europe - both the German Dax and French CAC 40 joined the FTSE in opening lower this morning.

How will the election affect the markets?

Investors would have been hoping for a decisive winner in the election.

With that now impossible, speculation will immediately begin about potential coalitions between one of the two main parties and the Liberal Democrats in order to secure a parliamentary majority.

A Labour-Lib Dem pact is seen by many as the most likely outcome. However, John Wraith, fixed income strategist at Merrill Lynch, warns that a Lib-Lab coalition could be bad news for the markets.

"If Labour does manage to swing the Lib Dems behind them, that's a coalition which would be horrible for gilts and sterling because you would have a very fragile government which could fall at any time," Wraith is quoted as saying in the Daily Telegraph.

 

However, former Monetary Policy Committee member David Blanchflower believes a hung parliament might actually be good news for the UK economy as it could prevent early spending cuts, which he believes, would be detrimental to the recovery.

"I do not think there is any evidence that the market thinks a hung parliament is a bad idea," says Blanchflower.

Gerard Associates Ltd advises expats and people considering living abroad on the options available for Pensions, QROPS and investments in a clear format allowing all customers to make an informed choice. This with the reassurance and security of UK authorised and regulated advice.

IFX Market Report

Submitted by qrops on Tue, 02/Mar/2010

Sterling was under attack from all angles yesterday morning as traders and investors sold off the pound as if it was due to become worthless. Two main factors lead to sterling at one point approaching its biggest one day drop in over a year.
Firstly, a report over the weekend in the Sunday Times suggested the existing Government may win more seats in parliament even if the Conservative Party win more of the popular vote. The talk of a potential hung parliament returned to the forefront of trading floor gossip. With the election getting closer, the implications of a hung parliament would make it nearly impossible to pass controversial or unpopular plans to cut the ballooning budget deficit. Decisions that would usually have been decided during cabinet meetings could potentially take weeks, if not more, to pass through the House of Commons.
Secondly, UK insurance company Prudential PLC, have been linked to the purchase of part of US giant AIG’s business. The Asian insurance company AIG is reportedly going to be sold for a figure of around $35.5bn much of which is to be made of up of a cash transaction.This potentially enormous transaction worried investors as Prudential would have to sell pounds to fund the dollars needed to complete the purchase.
This lead to the pound falling below the key psychological level of $1.50 during the morning session and then in just a few minutes the pound lost almost 2.5 cents, falling to $1.4781.At 12.30pm it had made back some of the losses, trading 2.4% down on the day at $1.4885, steering it away from the biggest fall since February 2009.
Technical analysts said selling picked up after the pound made a decisive break of key support around $1.5270 late last week, around the 50 percent Fibonacci retracement of 2009 rally.
The euro made huge gains against the crippled pound as well, with GBPEUR falling to €1.0928, the lowest since early December.
Sterling hit a one-year low against the yen of 132.07 yen, while it posted its lowest rate in 25 years against the high-yielding Australian dollar Traders also dumped the pound after data showed a dip in UK mortgage approvals in January, even as mortgage lending and consumer credit rose.
UK manufacturing PMI showed the manufacturing sector expanded faster than expected last month but this was largely neglected.
Analysts said they expected sterling to stay under selling pressure against the euro, while acknowledging that euro gains may be limited by the single currency's weakness against the dollar due to ongoing concerns about Greece's debt problems.
Sterling continued its slide despite an upward revision to UK economic growth last week as concerns simmer about a tepid economic recovery, high public debt and political uncertainty.
Sentiment has also deteriorated in the last week after the Bank of England said it stood ready to return to its asset-buying scheme if economic conditions warranted. This has prompted speculators to dump the pound, with positioning figures late last week showing another hefty rise in bets that sterling will depreciate 

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