Ben Bernanke

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

• Manufacturing production in the UK rose more than expected in September, rising for the first time in three months, official data showed. It showed to have risen by 0.2% in September, slightly higher than forecasts for a 0.1% rise.
• UK RICS house price balance came in at -24 versus -23 in September and beat expectations of -23, showing an increase in the number of houses sold, potentially sparking some growing realism among sellers as they are more willing to take offers to secure sales.
• Sterling managed to jump to a high of 1.1689 against the euro yesterday and 1.6119 against the US dollar.

ELSEWHERE

• All eyes on Europe yesterday, Italian Prime Minister Silvio Berlusconi failed to win an absolute majority and has agreed to resign, although this will be delayed until after the approval of the austerity plans which is scheduled for November 15.
• This news is alongside recent activity over in Greece which is expected to see the resignation of Prime Minister George Papandreou and the announcement of a new coalition government. Such rapid political changes will surely increase uncertainty over whether the euro area leadership will continue to foster enough of a consensus to keep muddling through the sovereign crisis.
• A quiet day yesterday in America saw the USD under modest pressure, especially against the JPY.
• EUR/USD hit a high of 1.3846 and a low of 1.3724. Risk certainly seems to be switched “on” in spite of the considerable uncertainty in Europe. The FX market and the S&P currently both suggest that the market is actually responding and trading in a very risk positive way, although this can be derailed by risk negative news.
• In Canada, housing starts fell less than expected in October, coming out at 208,000 units in October, beating expectation for a decline to 200,000 units. 

DATA TO LOOK OUT FOR (all times GMT)

• 1.30pm will see the CAD NHPI, which measures the housing industry’s health. Will it show a rising house price which in turn attracts investors and spur industry activity…??
• 1530pm, Ben Bernanke is making a speech on Small Businesses. Will he give a hawkish tone, is the question traders want to know.
• Crude Oil Inventories due out at 3.30pm in the US. This influences the price of petroleum products which affects inflation but also impacts growth as many industries rely on oil to produce goods.
• 9.30pm  New Zealand will have its RBNZ Financial Stability Report, which will provide insights into the banks’ view of inflation, growth and other economic conditions that will affect interest rates in the future.

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 the ultimate question of quantitative easing has almost certainly progressed from an

“if” to a “when” and so far expectations are of October or November. Such announcements

have, in the past, had significant detriment to the Sterling and the market appears to be

expecting the same this time. It is feasible, however that the market has already adjusted for the

rude surprise. This “clenched” reaction is certainly what we saw when Ms Merkel won a not dissimilar

vote in the German Parliament last Friday. Optimists will look at the positive PMI

(manufacturing) data from September as an adequate reason to hold off on QE and certainly the

first glimpse of growth in 3 months is not to be ignored. Everybody else, however is likely to

identify this as the catching up of backlog.

GBP/USD

Cable was nothing short of a rollercoaster yesterday with drop offs of 50, 43 and 69 pips.

Session high of 1.5573 and low of 1.5423, trading range of 150 pips and -1%. The US was

strengthened off the back of positive growth in the manufacturing industry, revealed by

September’s ISM report. However this 1% Month on month gain could only have had a nominal

contribution to the performance of the cross.

In Europe the single currency resumed its downward spiral on all fronts yesterday as fears of a

Greek default edge ever closer to materiality. This itself will not be news to many and alone

would not account for the currency’s performance today. What has changed is the market’s

faith in the remaining nations to be able to survive the default. A symptom of this is the credit

review of Franco-Belgian bank, Dexia by Moody’s. Although the officially reason is given as

“worsening funding conditions in the wider market” the bank’s €3.4bn Greek exposure cannot

be ignored.

GBP/EUR

Few will have foreseen the extent of the Euro’s fall off against Sterling yesterday. A splash-dash

23 pip recovery early this afternoon was likely a knee jerk reaction to the 32 pip drop seen just

minutes earlier. Sterling closed the session at a high of 1.1717 from a low of 1.1612. Analysts

will be ringing alarm bells as the cross approaches the 1.1723 mark, a high not seen since March

3rd 2011.

USD/EUR

A similar picture was painted against the US Dollar today. A dramatic 100 pip free-fall around

lunchtime was dwarfed only by the session’s trading range which saw a 195 pip fall out against

the session high of 1.3381 – the session low touching 1.3186 and closing just a shade above.

IN THE UK

• UK PMI Manufacturing data from September offers the first glimpse of growth in 3 months and the pound post gains against the euro breaching the €1.16 mark with further gains overnight, fast approaching €1.1723 a rate last seen in March 3^rd
• GBPUSD reached a high of 1.5573, session low of 1.5423 and a trading range of 150 pips – dropping -1% through the course of the session.
• Standard & Poor’s today maintained the UK’s AAA debt rating.
• UK Chancellor, George Osborne, has pledged to stick to his plan to use low interest rates to trigger national growth. Families and businesses would not be able to absorb the extra costs of increase in loan and mortgage repayments.
• The FTSE opens on the back foot this morning and falls below 5000.
• UK PMI Construction is released this morning, yesterday manufacturing surprised the markets with a better than expected figure, today’s figure showed a contraction to 50.1, below the consensus of 51.7 causing sterling to lose some of this morning’s early gains.

ELSEWHERE

• The US dollar makes gains across the board as investors look for alternative safe havens, avoiding CHF,JPY and Gold.
• FT Deutschland poised the question of George Papandreou’s resignation today – there is no official comment from the office of the Greek Prime Minister.
• AUD/USD broke to one-year lows to below 0.9450.
• The EU have said Greece are in line to receive their next bailout tranche of €8bn, suggestions are that Greece have enough money to operate until November.  
• Fitch downgrade world growth forecast for 2011 to 2.6% from 3.1%, Goldman’s drop 2012 Global GDP forecast to 3.5% from 4.3%.
• RBA leave interest rates on hold as largely expected but remain ready to drop them if necessary.

DATA TO LOOK OUT FOR (all times UK BST)

• Eurozone Producer Price Index is released at 10.00am, the figures in both the annual and monthly format are expected to show a slight contraction and could put further pressure on the faltering euro.
• ECB President Trichet speaks ahead of Thursday’s ECB rate announcement, there could be some clues in speech which begins at 2.00pm
• Fed Chairman Ben Bernanke gives a press conference at 3.00pm is likely to talk about ‘Operation Twist’ and widespread global debt issues and slowing economies
• UK BRC Retail Sales Monitor is released at 00.01am and will help to give a up to date picture of UK Retail Sales

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).

Following its rapid ascent to the dizzy heights of 1.17 (plus) over the weekend, the pound is

gradually losing momentum against the euro. With over a cent knocked off the value of

sterling we find ourselves with mid-rates circling the 1.1450 level as of this morning. Whilst

this retrenchment is not unusual following a rapid climb, the issues that caused the jump are

still no less significant, and, if anything, there is more damaging information due out from

the Eurozone which should make for a volatile day ahead.

GBP/USD remains below the 1.58 mark (yesterday’s high being 1.5799, with a low of

1.57303) despite the underperformance of the United States retail sector. Sales remained

unchanged in August, but it must be conceded that analysts were only forecasting for a 0.2%

increase from the month before anyway.

Yesterday also saw a number of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) come back under the microscope. Spain has been forced to explain her inability to deliver coherent deficit reduction proposals along with explanations as to the further contraction of her economic growth.

Although the Spanish banking sector got a boost from ratings agency Fitch’s reiteration of Santander’s AA status, the country itself is under pressure, and the same agency has warned that it could consider

downgrading the country if measures aren’t applied.

This threat of downgrade on one side of the Iberian Peninsula was countered by the

European Commission’s proposals to renegotiate more favourable terms for Spain’s

neighbour. Both Portugal and Ireland may see their borrowing terms altered to help

increase liquidity into their economic systems and enhance stability. With financial

institutions hesitant about depositing, or even taking steps to withdraw, from European

banks the improvement in their debt conditions comes at an opportune time and will assist

both countries in their sustained economic reform programmes.

French, German and Greek leaders have achieved their goal of assuaging further vexation to

the markets in relation to the Greek debt issue. Angela Merkel and French President

Sarkozy will both be meeting with the United States Treasury Secretary this weekend after

the conclusion of talks yesterday. Sterling was the only currency not to trade higher against

the dollar yesterday and it would seem that fears over whether there is any real weight

behind arguments in favour of further Quantitative Easing (QE) are growing.

Today brings forth retail sales figures for the UK, and with September representing the second most

active month for the UK high street, behind the Christmas Period, it will be interesting to see

whether retailers were able to entice Britain’s to shop over the course of July.

IN THE UK

• UK Claimant Count Change came in lower than expected based on month on month figures.  Those claiming last month dropped to 20.3k from expectation of 34.8k
• The Average Earnings Index posted better than expected figures.  Average earnings increased at a pace of 2.8%
• The pound lost further traction against the euro, which has nearly recovered to its pre-week commencing levels on the back of Greek assurances
• USD remains strong against GBP, trading within a narrow range.  Prices moved between highs of 1.57741 and lows of 1.57303
• Youth unemployment rose by 78k to 973k
• UK Retail Sales posted surprisingly better than expected figures this morning, despite the nationwide riots, sales fell less than expected in August.

ELSEWHERE

• Although policy makers rally to offer assurances for Greece the BRIC countries turn their attention to growth within the EEA.
• European Commission moves to improve bailout terms for economies of Portugal and Ireland in the hope of improving stability and enhancing liquidity – which has knock on positive effects on UK exposure to Irish lending.
• EUR/USD begins to rise again as Merkel/Sarkosy/Papandreou conference call goes fairly well.
• Increasing numbers of savers, including financial institutions, are withdrawing their money from potential troubled EU banks
• Soc Gen and Credit Agricole have their credit ratings downgraded by Moody’s ratings agency – but Bank of France governor rules out nationalising its banks; and other European leaders jump to rule out the potential of another Lehman Brothers scenario
• Strong amount of data from the United States return a broadly flat projection on retail sales and Purchasing Price Index
• European Commission president Barroso alludes to the potential for Eurobonds to play a part in stock market revitalisation.
• RNBZ leave interest rates on hold as widely expected but still remain hawkish.

DATA TO LOOK OUT FOR

• This morning Eurozone publish Q2 Employment Change figures and Consumer Price Index figures, particular attention will be paid to EU inflation this time as the current stance on interest rate within the ECB has changed.
• It is a busy day in the States today with employment, manufacturing and inflation data all being released, followed up by a speech by Fed Chairman Ben Bernanke in the evening.
• The markets will be paying attention to the Swiss National Bank’s monetary policy assessment, although it may be to soon to truly gauge their views on the currency peg introduced earlier in the 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.