International Monetary Fund

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 <?xml:namespace prefix = st1 />UK

• Sterling initially rose against the euro yesterday after Greek politicians struggled to agree on bailout terms which increased concern over the sovereign debt crisis and made investors return to safe haven assets, the pound rose from the session low of €1.2033 to reach the high of €1.2099..
• Sterling initially lost ground against the US dollar in early trade but retraced its losses in the afternoon moving away from the low of $1.5729 to end the session near the high of $1.5840.
• Concern mounts that even though the UK has seen a recent run of stronger-than-expected economic data which has supported sterling, this may be not be enough to dissuade the BoE policy members from announcing an increase in QE at their monthly policy meeting on Thursday.  

ELSEWHERE

• The deadline set for the Greek government yesterday to agree terms of a second bailout was missed. They must now give a decision before Eurozone finance ministers next meet. Despite missing deadlines the euro continues to find support and a new “final” deadline still seems to be next Monday, if we don’t have progress by tomorrow a break below $1.30 against the US dollar seems likely.
• French President Sarkozy and German Chancellor Merkel presented a united front yesterday, proposing the setting up of an account for Greece’s interest payments to guarantee lenders are paid in full.
• Moody’s investor services said that the outcome of the EU summit in January failed to encourage an improved outlook for the Eurozone and highlighted the risk for contagion as the region faces additional credit rating downgrades in 2012.
• The ECB are expected to maintain a dovish stance at its monthly rate decision meeting held on Thursday as speculation mounts we may see another interest rate cut.
• A Eurozone recession could almost halve Chinese growth this year, according to the IMF Chinas economy will grow by 8.2% this year but warns a recession in the Eurozone could cut this to 4.2%. Beijing should get ready to inject billions of USD into the economy to fend off any downturn. .
• BOJ Shirakawa has commented saying that current deflation and the Yen strength are very ‘severe’ and that steady policy needs to be implemented by investigating economic conditions.
• JPY weakened for the third time in four days against the dollar and euro as government data showed Japan carried out so called stealth intervention to weaken the currency in November, Japanese Finance Minister Jun Azumi said he won’t rule out any options to curb the currencies appreciation.
• In late trade yesterday the US dollar weakened significantly, falling over a cent to 1.3136 against the euro, a fall mirrored against the pound. Reports surfaced that the US debt situation is ‘Very Serious’ and ‘Crisis Mode’ could develop quickly.
• Perhaps the most surprising news of the last 24hrs is Australian central banks decision to leave interest rates on hold at 4.25% at 3.30am (GMT) this morning. With less than ideal employment, retails sales and housing market conditions, the markets were fully expecting a drop to 4.0%. The drop never emerged and AUD has strengthened by up to 1.0% against all of the majors pairs. GBPAUD now trades at 1.4650 and AUDUSD is just under 1.08.

DATA TO LOOK OUT FOR (all times GMT)

• Another fairly quiet day of data today and markets again will be driven by developments in the Eurozone.
• Germany release industrial production at 11.00am which is expected to rise for both MoM and YoY.
• The US releases consumer credit change for December at 8pm this shows the amount of money that individuals borrow, this is expected to fall to $7.30B from $20.37b previous.
• Meanwhile, in the absence of US data today, the only key event in the US is Federal Reserve Chairman Bernanke’s testimony to the Senate Budget Committee. We expect him to maintain the Fed’s dovish tone regarding the US economic outlook, despite the stronger than expected January non-farm payrolls.  
• At 11:30pm Australia releases Westpac Consumer Confidence for February.

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).

The Bank of England voted unanimously to keep rates on hold earlier this month, but they have not ruled out the possibility of further quantitative easing.  GBP improved against both USD and EUR yesterday and into the early hours of this morning (against EUR it was not by much, but sterling it determined to entrench itself in the new rate of 1.1850 and above).  Given the correlation between GBP, USD and EUR I believe that improvement against the greenback signals something of an increase in marginal risk appetite, and from that we may see a fractional loss on GBP/EUR…or rather, had the BoE not come out to assure the market it would release emergency funds to protect UK banks, I would have expected a slight lessening of aggression from the pound.

IN THE UK

• UK Chancellor George Osborne cuts UK growth forecasts for the next four years and says borrowing costs will rise by £111bn, as he warned the Eurozone could drag the UK into recession The pound pushed to a week high €1.1723 from the day low €1.1613 as the euro was sold off.
• Sterling holds firm against the US dollar as most of the bearish news from George Osborne’s statement has already been factored in, this helped sterling hit a one week high of $1.5655 on Tuesday
• Osborne also warns that Britain faces two years extra years of austerity as he sought to shore up his deficit-reduction plans, intensifying a conflict with unions that will stage a mass walkout.  
• Fitch warns that more shocks from the UK would seriously test its triple A credit rating. The top tier credit rating has been supporting healthy demand for UK Gilts; a downgrade would have serious implication for government debt management, reverse the UK’s recent safe haven status and place the pound under extreme pressure.    

ELSEWHERE

• Eurozone finance ministers agree ways to boost the strength of Europe’s bailout fund and have raised the possibility on the IMF getting more resources in order to help Eurozone countries that have been struggling to raise funds.
• The US dollar falls across the board yesterday as commodity currencies continued to rise amid improved risk appetite helped by a surprise rise in consumer confidence.  
• Following a five-hour meeting, ministers also agreed to release the €8 billion Greece needs to avoid bankruptcy and took the first steps to approve the next €8.5 billion tranche of Ireland's bailout
• The Australian and New Zealand dollar continued to rally in London trading, the AUDUSD rose above parity to reach $1.0021, a rise of 1.3%, the New Zealand dollar rose 1.1% to $0.7627
• The euro found support against the US dollar on Tuesday as the Italian bond auction goes well, selling €7.5bn debt at auction, though its costs reached euro area highs, EUR/USD has hit a high so far this morning of 1.3358
• The SEK and NOK gains sharply against the Euro, the SEK was helped by a massive export led 1.6% rise in Q3 GDP, Norwegian GDP growth was also higher in Q3.
• This morning German Unemployment falls dramatically by 20k, helping the euro recover some of yesterday’s losses against the pound.  

DATA TO LOOK OUT FOR (all times GMT)

• Eurozone Employment Rate is released at 10.00am and forecast to show no change from last month at 10.2%
• Eurozone Core CPI data is also released at 10.00am, last month figure showed inflation was at 1.2%.
• US ADP employment for November is due out this afternoon and is expected to come in at 131k, beating last month figure of 110k.
• US Non-Farm Productivity is release at 1.30pm along with Q3 Canadian GDP.
• The Fed’s Beige Book is released at 7.00pm and will give a very clear picture of US economic conditions. There have been some positive data releases in the US recently so if the results carry a more optimistic tone, risk appetite could be helped overnight.

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).

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.