Adam Posen

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).

N THE UK

·         Policy makers in the UK have been accused of not doing enough to promote competition in banking and nurture alternative sources of finance for small businesses.  As rates remain low and inflation is likely to continue to slow BoE Policy maker Adam Posen has pointed the finger saying that banks and policy makers are still risk averse and reluctant.

·         UK Purchasing Managers Index suggested a slight improvement in manufacturing, posting a figure of 52.1 versus expectations of 50.1 which resulted in GBP capitalising on a move higher against the dollar to $1.5857 and recovering back above €1.20 against the euro.

·         Having broken through a level of resistance at $1.5770 the pound moved to its highest level against the greenback since November of 2011.  Focus remains to the upside despite short term risk of a slight correction lower.

·         GBP/JPY is considered to have found a floor following a drop off in sterling during the month of January; the battle between these two safe havens seems to have changed direction and traders feel the pounds attack on key resistance level of 121 could pave the way for further gains. 

ELSEWHERE

·         Despite coming under increased pressure to join the bond swap being negotiated with Greece, the ECB remains coy over how it will help the country cut its debt burden. The Greek Government has until 20th March to reach a deal and release the second EU bailout.

·         Polish Finance Minister Jan Vincent Rostowski argues that factors such as the absorption of EU structural funds and recent measures undertaken by the ECB have stabilised conditions in the European environment; a feint voice against stiff criticism of German and French leaders.

·         All major currencies are trading higher against USD following better than expected PMI figures from China and Europe and the lower than expected figures for US ADP non-farm employment and PMI.

·         Switzerland posted retail sales a percent below expectations of 1.6%, but December saw a 21% rise in exports. Despite the offsetting effect of this information CHF lost value against GBP, EUR , USD and AUD and this morning’s worse than expected trade balance of 2.07B leaves the Franc open to further movement lower.

·         Australia posted a favourable trade balance (surplus) at $1.71B, exceeding expectations of 1.22B and bringing GBP/AUD and EUR/AUD to 1.4754 and 1.2280 respectively on the back of a boom in mining exports.

·         Japan posted a 15% figure for its year on year monetary base.  The Japanese bought the highest number of foreign bonds since September in the week ending 27th January, suggesting the BoJ are keen to hedge  against the risk of global inflation.

DATA TO LOOK OUT FOR (all times GMT)

·         Construction data for the UK is released later this morning, and the markets will be looking to asses comments expected from MPC member Posen at approximately 2.00pm.

·         US unemployment figures, forecasted for 373k, will be complimented by testimony from Fed Chairman Bernanke.

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 <?xml:namespace prefix = st1 />UK

• In the UK, on Wednesday it is expected that the preliminary Q4 GDP reading will indicate a slight contraction in the economy. Fuelling speculation of further Asset Purchases, figures of a further £100-200bn have been mentioned.
• A fairly busy week ahead for sterling data wise includes the CBI’s industrial and distributive trades surveys, consumer confidence and numbers on the public finance situation.
• With the current fragile state of the UK economy, and the recent turning point for sterling rallying back up to above $1.55, from a January low of trading down at $1.5269, the minutes of the January MPC meeting are pivotal for the currency medium term. This meeting will be closely monitored to look for the prospect of further QE and such a move could likely come at the February meeting.

ELSEWHERE

• Chinese banks are closed today for the Spring Festival.
• With markets remaining very much driven by swings in risk sentiment, the tone for the week could be set by the lack of progress in the talks on Greek debt restructuring and on whether or not a disorderly default can be avoided.
• The euro fell for a second day on concern that Greece will struggle to reach an agreement with creditors to ease its debt burden. European officials will forge ahead again today with crafting a long-term plan to tackle the region’s debt crisis, as banking and government negotiators continue trying to reach an agreement that will lighten the Greek debt burden through private investor haircuts, the only question seems to be will they be forced or voluntary?
• EUR/USD has had a turbulent week, opening last week at $1.2638 and closing at $1.2936. A volatile trend that looks set to continue as opening today was nearly half a cent lower at $1.2890. It could of and perhaps should have been a lot worse for the euro as it looks to have shaken off the recent S & P downgrades. Draghi’s flippant comments about the over reliance on credit scores may well have helped markets dismiss the downgrade.
• On the economic data front, the week sees the first estimate of Q4 US GDP. Other significant releases include pending and new home sales, durable goods orders, the final January Michigan sentiment reading and the latest weekly jobless numbers. Also, the US earnings season continues.
• Several other events in the week ahead that could help to determine market risk appetite, as well as the run-up to the EU Heads of State Summit on Monday, January 30th. From a global perspective, the views of attendees at the Davos World Economic Forum will be of interest as will be the latest economic update from the IMF.
• Japanese CPI data is likely to show the economy still mired in deflation with trade data indicating a fall in exports which has weakened yen across the board.
• Prices paid by Australian producers, one of two gauges of cost pressures in the economy released this week, decelerated for a third straight quarter, boosting scope for the central bank to lower borrowing costs next month, a critical decision which  may stem the recent appetite for commodity currencies like AUSD and NZD. 
• This morning Australian PPI came out slightly under consensus at 0.3%, which adds weight to the argument for reducing interest rates again.

DATA TO LOOK OUT FOR (all times GMT)

• Today is a fairly quiet day for data but as mentioned earlier, Eurozone finance ministers today and will discuss the Greece situation.
• Canadian Leading Indicators is released at 1.30pm and expected to show a drop from last month’s figure.
• At 3pm, Eurozone Consumer confidence expected to slightly improve but still show a very negative sentiment at -20 from a figure of -21 last month. 
• MPC member Adam Posen is speaking today in Nottingham, traders may look to this for any indications on further QE. 

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.

IN THE <?xml:namespace prefix = st1 />UK

• The Bank of England’s Monetary Policy Committee votes unanimously to hold interest rates at record lows
• One of the MPC’s members, Adam Posen, as usual votes in favour of an increase to the asset purchasing facility; and the potential of further Quantitative Easing remains given the sustained level of inflation
• Average earnings in the UK rise for 2.3% to 2.6%, which both beats the previous month’s and exceed expectations.  This does not account for the increase in unemployed graduate numbers, which is visible through and increase in the UK unemployment count
• Sterling shows a highly reactionary move; with a full cent change over the course of the European sessions.  GBP moved from 1.1350 to 1.1450 over the course of the afternoon, despite European decision makers showing unity over the route the EU must take to reform its financial and debt policies

ELSEWHERE

• Consumer prices in general came through on par for the Eurozone, however the core price index did should a fractional drop below the expected 1.7% increase
• The majority of focus was on the notion of Eurobonds and their uses in controlling the contagion affect across the Eurozone.  Whilst EUR/USD traded within a relatively narrow range (1.43809 – 1.4452) the market remains uncertain, and the ban on short selling has done to curb the drop off broadly across the European exchanges.
• The USD dropped considerably against sterling to reach a floor at 1.65536, prompting the view that risk had returned slightly to the market place, and that the UK was still the market of choice for credit and debt derivate contracts
• Although the CHF lost ground against GBP, it has been conclude that the SNB has been unsuccessful in curbing its significant strengthening, and there was no talk whatsoever of a currency peg, which had been on the cards earlier in the week

DATA TO LOOK OUT FOR

• US core CPI and unemployment figures should give a more detailed figure of the scale and effects of inflation on the US grass roots economy
• US existing homes sales are expected to exceed 4.77M forecast to reach a predicted 4.91M level
• A level figures released in the UK will reveal the effects of the secondary education uptake for the year to come, as more applicants and fewer places, coupled with a tuition fee increase may see an increase in the number of unemployed young people entering the market