The combined effect of ongoing
volatility in both currency and equity markets remains a challenge. Things are
still very volatile and we are in unique territory. In conjunction with investment returns,
currency exchange continues to concern many expats with UK Pensions, QROPS and
now QNUPS.
Continuing our daily look at
factors affecting currencies allows 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.
Yesterday
sterling began to gain back some of the last week losses against the euro but struggled
against a broadly firmer US dollar, which was supported on risk-aversion stemming
from the single currency's weakness.
"The
euro is the basket case of the currency world at the moment and sterling has benefited
from that on the cross," said Michael Hewson, currency analyst at CMC Markets.
The
euro fell broadly, pulling back from gains last week, after the Spanish central
bank's takeover of a savings bank increased fears about debt problems in some
of the weaker Eurozone countries.
At
2.00pm, the pound was trading close the day's high at 1.1648. Versus the dollar
it had slipped 0.5% to $1.4400 as the dollar had risen against many currencies.
Sterling had earlier risen to a one-week high of $1.4529 as stop-loss orders
were triggered through $1.4500 and $1.4525.
The
pound remained relatively unchanged after Chancellor of Exchequer George
Osborne's
announced £6bn worth of public sector spending cuts, in line with expectations and
of which the bulk would be used to trim the budget deficit this year.
The
newly formed Conservative/Liberal Democrat government has said reducing the deficit
which is at around 12% of GDP is its top priority, especially as the debt
crisis in the Eurozone has sent global stock markets hurtling downward.
"Around
the world there is a decisive shift taking place. Countries are waking up to
the dangers of a sovereign debt crisis and taking action to live within their
means," Osborne said whilst revealing his spending cuts in front of the
media.
Data
showed the market remains overall short sterling against the dollar. Meaning
most investors are selling the pound to fund dollar purchases because they are
betting the pound will weaken. The Commodity Futures Trading Commission said
currency speculators increased net sterling short positions to 76,745 contracts
for the week ended May 18, from 72,188 contracts.
With
inflation currently causing concern for many experts, outgoing Bank of England
Monetary
Policy Committee member Kate Barker was quoted as saying it would be wrong to
get too worried about the latest jump in inflation as underlying pressures
remain low.
This
the line of thought was backed up BoE policymaker David Miles, saying inflation
should start to fall to the central bank's two percent target over the next six
months.
The
second estimate of Q1 GDP data due out later today is likely to be the highlight
of a quiet data week in the UK. Analysts expect a slight upward revision from
0.2% initially posted.
Gerard Associates Ltd advises
expats and people considering living abroad on the technical and currency options available for Pensions, QROPS
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.
Authorised and Regulated by the Financial Services Authority
