Spanish central bank

The combined effect of ongoing volatility in both currency and equity markets remains a challenge. Things are still very volatile and we are in unique territory.  In conjunction with investment returns, currency exchange continues to concern many expats with UK Pensions, QROPS and now QNUPS.  

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.

Yesterday sterling began to gain back some of the last week losses against the euro but struggled against a broadly firmer US dollar, which was supported on risk-aversion stemming from the single currency's weakness.

"The euro is the basket case of the currency world at the moment and sterling has benefited from that on the cross," said Michael Hewson, currency analyst at CMC Markets.

The euro fell broadly, pulling back from gains last week, after the Spanish central bank's takeover of a savings bank increased fears about debt problems in some of the weaker Eurozone countries.

At 2.00pm, the pound was trading close the day's high at 1.1648. Versus the dollar it had slipped 0.5% to $1.4400 as the dollar had risen against many currencies. Sterling had earlier risen to a one-week high of $1.4529 as stop-loss orders were triggered through $1.4500 and $1.4525.

The pound remained relatively unchanged after Chancellor of Exchequer George

Osborne's announced £6bn worth of public sector spending cuts, in line with expectations and of which the bulk would be used to trim the budget deficit this year.

The newly formed Conservative/Liberal Democrat government has said reducing the deficit which is at around 12% of GDP is its top priority, especially as the debt crisis in the Eurozone has sent global stock markets hurtling downward.

"Around the world there is a decisive shift taking place. Countries are waking up to the dangers of a sovereign debt crisis and taking action to live within their means," Osborne said whilst revealing his spending cuts in front of the media.

Data showed the market remains overall short sterling against the dollar. Meaning most investors are selling the pound to fund dollar purchases because they are betting the pound will weaken. The Commodity Futures Trading Commission said currency speculators increased net sterling short positions to 76,745 contracts for the week ended May 18, from 72,188 contracts.

With inflation currently causing concern for many experts, outgoing Bank of England

Monetary Policy Committee member Kate Barker was quoted as saying it would be wrong to get too worried about the latest jump in inflation as underlying pressures remain low.

This the line of thought was backed up BoE policymaker David Miles, saying inflation should start to fall to the central bank's two percent target over the next six months.

The second estimate of Q1 GDP data due out later today is likely to be the highlight of a quiet data week in the UK. Analysts expect a slight upward revision from 0.2% initially posted.

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