US Fed

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

• Although data recorded a drop in UK retail sales of 0.4% in November, they posted a three month gain of 0.7%, the strongest such gain since August 2010. Across the day, GBP enjoyed a rally to a high of $1.5529 against the dollar belying the ongoing weakness perceived in the British economy.
• While private consumption continues to stall, the BoE will surely see a growing case for expansion of its monetary policy and the minutes of the most recent policy meeting, due out next week, suggest a growing pessimism regarding the economy, expectation for further QE will surely increase.
• Christian Noyer, head of Bank of France, caused a stir by claiming that the UK should have its credit rating cut from the prestigious AAA before France given the relative deficits, debt, inflation and growth.
• GBP/EUR fell from highs of 1.1939 to 1.1868 and back before consolidating between 1.1910 and 1.1920 where it seemed to settle throughout US and Asian trading. 

ELSEWHERE

• Despite the ECB’s monthly report insisting the euro is still under considerable pressure, Spain’s treasury sold €6bn medium and long term bonds, surpassing a target of €3.5bn while 5yr bonds were at an average yield of 4.02%, down sharply from 5.27% last month and 10 year bonds boasted a yield of 5.54% compared to 6.97% last month. Importantly, some consider the stark improvement an indication of ECB involvement in the secondary bond market and therefore somewhat artificial.
• SNB announced their decision to maintain a EUR/CHF floor at 1.2000 with ‘utmost determination’. The intention to maintain the peg which was established on September 6 saw the franc rise 1.2% against the euro to CHF 1.2229 – a six week high.
• This was compounded by the SNB also deciding to keep its key refinancing rate close to zero while Swiss industrial production data recorded a greater than expected decline in the third quarter.
• Manufacturing activity across the Eurozone posted a surprise increase for December although the figure, 46.9, is the fourth consecutive month where the published figure has come in at less than 50, which shows growth or contraction.
• Consumer price inflation remained unchanged at an annualised rate of 3%, in line with consensus.
• Further developments to the European crisis resolutions saw Russia commit EUR10B to the IMF but a dent to plans for longer-term refinancing operations came as bankers seem unlikely to buy more sovereign debt using the 3 year loans available from the ECB from next week
• EFSF have been accused, in some circles, of irresponsibility as the draft prospectus for the latest bailout instruments cites “Risks arising from a Reference Sovereign ceasing to use the euro as its lawful currency...or the cessation of the euro as a lawful currency” as part of four pages of potential risks.
• A short term correction in the major currencies saw the greenback cede gains, which reached as low as $1.2955 against the euro, as part of a rally which will hinge on Friday’s economic docket.
• Data could bolster the dollar with the headline reading for US inflation anticipated match the previous such release. Thursday’s Producer Price Inflation datum in the US matched expectation at a 0.3% rise. Such stubborn price growth and a steady increase in economic activity might hinder expectation for the FOMC to undertake another large scale asset purchase program.
• Thursday’s other data releases saw initial jobless claims fall to a three year low of 366k, according to the Department of Labor, despite predictions of a climb to 390k. The New York and Philly Fed indices of manufacturing conditions climbed to 9.5, a seven month high, and 10.3, double the expected figure, respectively. 

DATA TO LOOK OUT FOR (all times GMT)

• In a relatively quiet day for data, new ECB President Mario Draghi takes part in a panel discussion at the Banca d’Italia, in Rome.
• Eurozone Trade Balance data is released at 10.00.
• US Consumer Price Index is released at 1.30pm and expected to show inflation has remained at 3.5% annually.
• US Fed members Evans and Fisher are due to speak in Fiesole and Austin respectively this evening.

Have a great weekend.

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

• UK Consumer Price Index figures are released today ahead of the MPC’s inflation report. Some analysts are forecasting a 0.2% drop in CPI inflation to 5% and a “considerably weaker outlook for growth and inflation” than in August. Thus raising concerns of an extension to the QE asset purchase program.
• GBP/EUR traded with a day’s low of 1.1622 and high 1.1685. The pair had begun to suffer toward the start of the Italian bond auction but news of the record yields brought about a jump back to 1.1673.
• GBP/USD hit its peak before the European session reaching 1.6072 just after 7am, the pair then gradually slid down to the day’s low of 1.5856.
• Mayor of London, Boris Johnson has publically attacked the Euro and called for its dissolution thereby breaking away from the UK Conservatives. 

ELSEWHERE

• EUR/USD saw significant movement yesterday. Day’s high of 1.3722 and low of 1.3593. The pair is likely to maintain this trend as uncertainty in Europe continues and indeed grows.
• Angela Merkel has addressed the Christian Democratic Union yesterday and stated in no uncertain terms that “Europe faces its most difficult hour since World War II”. Meanwhile her party voted for a scheme to allow countries to leave the Euro – something which is outlawed by its memorandum.
• Spain has joined Italy and Greece with bonds yielding over the 6% threshold which has in the past triggered panic and rescue funding – this is a strong sign of the build-up of contagion.
• An auction of €3bn Italian 5 year bonds saw yields hit a Euro-era high of 6.29% following in the steps of the 10 year bonds which reached their equivalent record last week and approached 7.5%.
• Italian “mega-bank” Unicredit revealed shocking figures yesterday, including a €10.64bn loss in the past year. Deeply concerning not least for its status as one of 29 systemically important global banks.
• Mr Samara, leader of the Greek opposition party has agreed to join the interim Government but refuses to agree to any further austerity. The country is now one month from bankruptcy.
• JPY, CAD, AUD and USD all showing strength as major safe haven currencies, a clear demonstration of the market’s diminished risk appetite. Leadership changes in Italy and Greece have not quelled anxiety as hoped.
• US Fed further quantitative easing 

DATA TO LOOK OUT FOR (all times GMT)

• A busy day for data starts today in the UK with inflation data at 9.30am. Retail Price Index and Consumer Price Index figures are released for October. Inflation is expected to have cooled slightly which won’t help the pound whilst the talk of quantitative easing is still doing the rounds.
• DCLG House Price Index figures are also released at 9.30am and will give an accurate picture of the UK housing market.
• At 10.00am in Europe, the collective and individual nation’s ZEW surveys are released for Economic Sentiment and Current Situation ratio. If high figures are released the euro will be supported but low figures will suggest that the outlook is not so bright and put additional pressure on the euro.
• Eurozone preliminary GDP figures for the 3^rd quarter are released at 10.00am and expected to remain at 0.2%. Any surprises here will have big impact on the euro.
• Eurozone Trade Balance figures follow and wrap up the European data and are expected to show a slight decline to €-1.3B
• Moving to the US, Producer Price Index in its various formats along with Retail Sales is released at 1.30. A mixed bag of results is expected so it’s difficult to predict how the dollar will perform this afternoon.
• Canadian Motor Shipments and New Car Sales is released at 1.30pm, Car Sales is expected to show a healthy rise to 1.9%
• US Business Inventories at 3.00pm ends what could become a volatile trading day and expected to post a slight fall to 0.2% from 0.5% last month

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).

Tuesday was a quiet day on the data front but sterling managed to break out of a nasty

downtrend which had seen world markets tank as the US dollar strengthened.

Problems in the Eurozone with their debt crisis increased fears in the marketplace which

went into risk aversion mode. “Operation Twist” by the US Fed also helped increase short term

demand for the US dollar.

After developments over the weekend and early this week there seems to be light at the end

of the tunnel for Greece and the Euro debt crisis, markets have flipped to risk-taking mode

and are looking to take back some of the last weeks’ losses. The pound is poised to receive

the benefit of some of that risk appetite despite the economic environment in the UK.

The UK economy has defied Central bankers and finance officials who have been wrong for

the past two years. Inflation has increased in the UK and the Bank of England’s belief that it would subside has not happened yet. The Bank of England haven’t done anything to combat inflation because an interest rate hike is dangerous with a weak economy.

The Bank of England’s stance has changed recently, reporting the economy is seriously slowing down and could require further monetary easing. Fortunately, the figures don’t quite warrant

intervention yet but it is on the cards if the economy doesn’t pick up.

If the Euro debt crisis is partially responsible for the decline in the growth of the global economy, then it stands to reason that if a solution can be found, the UK economy and the pound should see gains.

New figures show that growth in the Eurozone's money supply, a key indicator of demand in

the economy, rose again in August. The European Central Bank said the M3 indicator rose at

an annual rate of 2.8% last month, following a gain of 2.1% in July. The rise was bigger than

economists had expected.

The ECB regards the M3 figure as a key guide to inflation pressures and uses it to set interest

rates accordingly.

Across the pond, CB consumer confidence in the US rose less-than-expected last month.

Analysts had expected confidence to rise to 46.5 last month but in the report, the

Conference Board said that its index only rose to 45.4, from 45.2 in the preceding month.

In the UK, retail sales weakened at their fastest pace in 16 months during September.

According to the CBI distributive trades survey, 24% of retailers saw sales volumes up on the

year, while 39% reported a fall, giving a balance of -15% in September from -14% in August.

The CBI blamed the dip on a combination of low wage growth, high prices and rising

unemployment but said sales appeared to be stabilising. That said, stores expect little

improvement in October.

IN THE UK

• Very quiet on the data front, however after a low of 1.5524 against the US dollar, sterling managed to make headway and briefly hit a high of 1.57048 in the afternoon.
• Trade remained very choppy against the euro but within a relatively tight range, we saw a high of 1.1528 and a low of 1.1480
• The pound is expected to receive the benefit of some risk appetite despite the UK economy’s signs of weakness, on the back of seemingly “light at the end of the tunnel” for Greece and the Eurozone debt crisis.

ELSEWHERE

• Euro zone Money Supply (M3), rose by more than expected. It showed that it had risen at an annual rate of 2.8% last month, following a gain of 2.1% in July.
• The M3 figure is regarded by the ECB as a key guide to inflation pressures and uses it to set interest rates accordingly.
• Despite ‘light at the end of the tunnel’ divisions are emerging between EU members on the exact terms of the restructuring of Eurozone debt.
• European officials have a pop at US officials and asks them to keep their noses in their own business, The US has just as many problems as Europe. Trichet says Europe needs support not lectures.
• The German GfK showed at 5.2 points in September and is forecasting 5.2 points for October also, indicating despite rising fears of recession, in Germany the consumer climate should remain stable through the autumn
• Over in the United States, the CB Consumer Confidence rose to 45.4 from 45.2 in the preceding month, which was less than expected. Expectations were for a rise to 46.5 last month.

DATA TO LOOK OUT FOR (all times UK BST)

• Busy day for US data starts with MBA mortgage approvals at 1.00pm, this gives an picture of how the housing market will perform in the coming months, last month figure was 0.6%.
• German CPI is released today, annual inflation is expected to remain at 2.4%
• US Durable Goods Orders released at 1.30pm, the figure is expected to fall from 4.0% to 0.4% this month.
• 3.30pm we have Crude Oil Inventories from the US. Expected to show a reading of 1.1M.
• 10.00pm Fed Chairman Ben Bernanke will deliver a speech titled “Lessons from Emerging Market Economies on the Sources of Sustained Growth”. Interesting to see if this has any effect on the markets 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.