George Osborne

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

• The Bank of England as expected left rates unchanged at 0.5% and Quantitative easing at 275bn creating some relief and helping sterling climb to $1.5408 early this morning from the three month low of $1.5279 hit yesterday.
• Most traders still expect the Bank of England to extend quantitative easing at the February meeting, which is acting as black cloud over the pound’s head, any comments suggesting this in the coming weeks will weaken sterling.
• Sterling tumbles against the euro as successful Spanish and Italian debt auctions bring some relief to the euro, sterling has already fallen to a low of €1.1936 this morning
• UK Industrial output falls 0.6% in November, heightening concerns over the strength of the economy.
• George Osborne debates on whether Scotland should use the pound or the euro if there were to become independent. Alex Salmond’s says Scotland would initially use the pound and enter into the euro at a later date. Osborne thinks this plan will fall apart.
• Sterling continues to fall against the AUD, already hitting a low of AU$ 1.4837 this morning 
• UK Producer Price Index reveal slightly worse than expected figures, all components fell however this has not affected the pound so far.

ELSEWHERE

• Spanish and Italian debt Auction go better than expected yesterday, Spain sold double the targeted amount and raised €10bn whilst Italy raised €12bn. In response, the euro strengthen across the board with EURUSD moving back above $1.28, hitting a high of $1.2878 this morning.
• Following the auction, the benchmark Italian and Spanish 10-year bond yields fell respectively to 6.55% and 6.08% in the secondary markets
• In their monetary policy meeting, the ECB as expected kept rates unchanged at 1%, Draghi’s comments helped the euro as he indicated there were signs of stabilisation in the Eurozone and suggested no immediate plans for a further rate cut.
• China’s foreign exchange reserves drop for the first time since 1998, falling to $3.18 trillion on Dec 31 from $3.2 trillion Sept 30 as foreign investments moderate, trade surplus narrow and Europe’s crisis spurred investors to sell emerging market assets.
• The US dollar was hit by the European bond auctions going better than expected as investors fly out of the safe haven and move to riskier assets.
• US unemployment benefits jumped last week rising to a six week high of nearly 400,000 jobs
• US retail sales continued their upward crawl in December, rising 0.1% in the month according to initial estimates 

DATA TO LOOK OUT FOR (all times GMT)

• European trade balance for November is released at 10.00am.
• US trade balance is due out at 1.30pm and is expected to come in at $43.47bn which is lower than the previous figure of $45bn
• At 2.55pm, the Michigan Consumer Sentiment Index is released, the recent good run of US data is expected to have push sentiment up to 71.5 from 69.9.

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 Bank of England Quarterly Bulletin was held yesterday and confirmed the gloomy outlook for the UK economy. Unemployment has remained higher than before the recession, and credit conditions are still tight.

• The pressure on household finances intensified in December, with new figures showing the squeeze is now heading towards the record levels recorded in August.  Britain's recovery from the recession of 2009 has been slowed by falling consumption "reflecting the challenging environment facing  households".

• Data showed 56% of households reported a fall in deposable income in the last 12 months whilst only 13% saw a rise.

• UK Chancellor, George Osborne, believes the economy will grow 0.9% this year and just 0.7% in 2012. This figure has been revised downwards twice in the last 12 months. He announced new regulations covering UK banking. Very simply, retail and investment banking will be separated within banking institutions to help avoid the problems seen in 2008 when Northern Rock, RBS, Lloyds and HBOS hit the headlines.

• Yesterday’s news was not all bad as Dr Howard Archer, chief UK economist IHS said November's dip in inflation to 4.8% from a three-year high of 5.2% in September should mark a step in a substantial downward trend that will increasingly ease the squeeze on purchasing power.

• Rating agency Fitch cut several big name banks including UK based Barclays.  Concern about the UK's heavy exposure to the banking industry is likely to put pressure on the pound as trading winds down towards the year end.

ELSEWHERE

• The Euro lost further ground after Draghi admitted the law prevents him from extending the euro bond purchase programme further.

• Eurozone sovereign associated risk remains unchanged, the ECB’s new head told the EU parliament that purchases of peripheral debt were temporary and "not infinite”.  He was also downbeat on the region’s growth prospects, saying that 2012 will be a difficult year for the Eurozone's banks and that recovery in economic activity is likely to be slow.

• Following several days of intense speculation of forthcoming rating cuts, Fitch has placed France under a negative rating outlook for a possible downgrade The rating agency explains that the country has the highest structural budget deficit and more debt than its peers. This negative outlook means that there is more than a 50% chance that France will lose its triple-A rating over the next two years.

• Belgium, Spain, Slovenia, Ireland, Cyprus, and Italy were placed under credit watch negative. These countries already had a negative rating outlook so the new warnings have put their ratings at more risk. Fitch said it will reach its conclusion in January and the cut could be of one or two notches.

• Pressure is mounting on Spain after the latest set of disappointing figures were released yesterday. The bad loans rate for the Spanish financial sector rose to 7.416% in October. Overall, €131.908bn in loans were more than three months overdue and October's rate was the highest since November 1994.

• Markets opening was mixed on Monday, as news that North Korean leader Kim Jong Il died of a heart-attack circulated the markets. Although his son is expected to succeed him, the news has South Korea's military and other countries on alert at the wait for the succession to be confirmed. Asian stocks reacted with general losses.  The South Korean Kospi fell more than 5% while Japan's Nikkei fell 1.26%.

• The US Dollar rose off the back of the uncertainty versus the majors and the South Korean Won. This news has unleashed some rumours about the relationship between the two Koreas, ranging from the possibility of new confrontations to a possible unification.

• Germany, the Eurozone’s biggest contributor had promising IFO figures released this morning, all 3 components showed healthy rises. Possibly the most important European data release of the week shows that Germany is still performing well.

DATA TO LOOK OUT FOR (all times GMT)

• CBI Distributive Trade Survey is released at 11.00am in the UK, an indicator of trends in the retail and wholesale sector. The markets are expected a slight improvement from last month’s -19% to -17%

• Canadian inflation figures are released at 12.00pm, both annual CPI and Core CPI are expected to show rises to 2.2% and 2.9% respectively.

• US Building Permits are released at 1.30pm and expected to show the number of permits dropped slightly in Nov, however actual Housing Starts is expected to have risen in Nov.

• New Zealand Current Account Information is expected to show net flow of cash has

dropped significantly into the red, -$3.755bn from -$0.92bn 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).

IN THE UK

• Sterling fell below the critical 1.5850 support level against the dollar, reaching a low of 1.5798 as the UK inflation slowed more than expected giving the Bank of England reason to continue their dovish stance on monetary policy.
• Bank of England governor Mervyn King remains insistent that inflation will drop aggressively, the CPI reading of 5% is still well beyond the government’s 2% target, as it has been for the previous 22 months, leading the governor to write yet another inflation letter to George Osborne explaining why Inflation is still above target.
• The pound remains under pressure this morning as figures show the Employment Rate in the UK has risen to 8.3% above the consensus. Reports earlier in the month suggest that business leaders feel unemployment figures are likely to get worse before they start to improve.

ELSEWHERE

• EU president Herman van Rompuy yesterday urged Eurozone governments ‘to do more’ in ordering their own houses, asserting that the euro-area has the ‘means’ to escape the current crisis.
• Positive sentiment from a new Italian government has worn off. Perhaps a smooth government handover could have invigorated investor confidence, for the moment Mario Monti seems to be working against a gradient.
• Italian and Spanish bond yields continue to suffer with the Italy’s 10 year return once again surpassing the ominous 7% threshold, where the cost of borrowing essentially increases faster than a region can sustain repayments.
• Q3 GDP data from Europe served to divide market sentiment as France and Germany appear to have staved off the dreaded contagion, for now at least, with respective growth of 0.4% and 0.5% but the figures leave France desperately short of their growth target for 2011.
• The aggregate decline in Eurozone confidence saw EUR/USD close the European session over a cent down from the same time on Monday at $1.3623.
• Market rumours have emerged suggesting that the ECB intervened in the bond market to purchase Italian debt and the governing council may have little option but to expand its monetary policy as the region braces for a ‘mild recession.’
• Credit Suisse data shows the markets believe there is a 62% chance of a further 25bps cut interest rates from the ECB in December. Speculation on future policy could subsequently weigh on the exchange rate as investors consider the impact of future policy.
• Risk aversion played a strong role in Tuesday’s trading but a rally for equities suggested a sharp turn in sentiment for the second half of the day after the dollar was boosted by a tranche of positive data from the states, including better than expected data retail sales. The dollar carried an advance until this morning when risk aversion seemed to resurface.

DATA TO LOOK OUT FOR (all times GMT)

• In the UK this morning at 10.30am the Bank of England releases the Quarterly Inflation Report  The consensus seems to be that King will maintain the central bank’s dovish tone regarding monetary policy and the outlook for growth will be considerably weaker
• Main data today in the US is release of Consumer Price Index at 1.30pm; this will provide information on US inflation and give the markets a heads up on future US monetary policy.
• US Industrial Production is published at 2.15pm with some predictions expecting a solid 0.4% growth given complications in Japanese led supply-disruptions spurring an increase in US output 

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.