We continue our daily look at factors affecting currencies allowing 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.
Investment market volatility and currency exchange remains a challenge. Things are still very volatile and we are in unique global influencing territory. In conjunction with investment returns, currency exchange continues to concern many expats with UK Pensions, QROPS and now QNUPS.
The pound posted its biggest weekly loss against the dollar since August on Friday amid speculation ahead of the weekend’s G20 meeting in South Korea may result in agreements that will support the US currency.
Sterling fell for a sixth week versus the euro, the longest stretch since November 2004, as G-20 finance ministers and central bankers embarked upon round of talks.
The pound and dollar have both dropped versus the euro this month on concern the Bank of England and Federal Reserve will both re-commence their asset buying purchase programmes.
Sterling was 0.2% weaker at $1.5672 at 5:00 pm in London, depreciating against the US currency in four of the last five days. It fell 0.2% to €1.1268 against euro and was little changed at 127.72 yen.
Bank of England minutes released this week showed policy makers were perhaps leaning toward a second round of quantitative easing to boost the economic recovery, helping drive the pound to its weakest level in more than six months versus the euro.
The Monetary Policy Committee split three ways as a majority voted to maintain the key interest rate at 0.5% and bond purchases at £200bn pounds. Policy maker Adam Posen voted to boost QE by £50bn pounds and on Thursday said the recovery in the economy appears “patchy.” Andrew Sentance was the only member who pushed for an increase in the key rate to 0.75%.
In contrast, German Chancellor Angela Merkel said on Wednesday governments must find an “exit strategy” from stimulus spending, and last week Bundesbank President Axel Weber called for an immediate end of the ECB’s bond-purchase program.
Chancellor of the Exchequer George Osborne on Wednesday detailed his plan to almost eliminate the nation’s record £156bn budget deficit. Osborne proposes to slash 500,000 public-sector jobs, impose a levy on banks and cut spending by £81bn pounds over five years. He aims to narrow a deficit the government forecasts at 10.1% of gross domestic product this year to 2.1% of GDP in the 2014-15 fiscal year. Debt interest costs would fall by more than £5bn by 2015.
The pound has depreciated 5.9% this year against a basket of its developed-country peers, making it the worst performing currency
G-20 meeting - Saturday Results
Despite rising before the meeting the US dollar fell against the euro and the yen after this weekend G-20 finance ministers and central bankers vowed to avoid weakening currencies to lift exports.
Officials called for more sustainable current-account gaps without embracing a US proposal for targets, as they ended talks in South Korea on Saturday. The Australian and New Zealand dollars climbed for a second day on speculation the pledge will calm concern over trade tensions and a November 3rd Federal Reserve policy decision may signal the start to a second round of bond purchases, boosting demand for higher-yielding assets.
G-20 officials pledged to refrain from “competitive devaluation” and to let markets set foreign-exchange values as they sought to calm fears that a trade war may break out if nations use cheaper currencies to spur growth.
This was the first time economic policy makers took a joint stance on exchange rates after previously resisting such actions for fear of alienating China. The G-20 statement still recycles language used at previous leaders’ summits in London and Toronto and falls short of the currency accords of the 1980s.
The statement should be “positive for risk appetite,” UBS said, and would likely support the Australian and Canadian dollars, the Nordic and emerging markets currencies at the expense of the U.S. dollar.
Citigroup Inc. strategists said the meeting “will serve to reinforce downward pressure” on the dollar against the major currencies as the communique fell “well short” of a 1985 Plaza Accord-style agreement to manage the dollar’s decline.
Australia’s dollar may benefit as it is “the most liquid currency with tight links to China,” they said in a report.
Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, QROPS, QNUPS 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 – essential tools for your security.
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