Mervyn King

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

• Bank of England policy maker Adam Posen spoke last night and said officials will increase their bond-purchase target next month if new forecasts for growth and inflation justify expanding stimulus again. “If we choose to do more in February, which we may or may not, but IF we choose to do more in February, it’ll be because the forecast demands it,” The central bank, which last expanded stimulus in October to £275bn with a program that is due to be completed early next month. 
• GBPUSD continued on a steady rise yesterday but the pound rally stalled at the $1.5600 mark as US stocks erased gains and turned negative in afternoon forcing the pair to stay in the $1.55’s
• Tomorrow, the BoE will publish the minutes of the January policy meeting, revealing how the MPC voted. The Office for National Statistics will release the first estimate of fourth- quarter GDP data at the same time
• The pound remained below the key €1.20 level against the euro and has seen further losses this morning dropping to a low of €1.1918.

ELSEWHERE

• The euro pushed through the $1.30 level against the US dollar yesterday, bolstered by optimism that Greece was set to cut a deal with its private sector investors on a debt swap. Despite no official resolution, the markets are beginning to gain confidence that an agreement will be reached. The main stumbling block at this point seems to be over what coupon creditors will receive on the planned new bonds. Some official say that Greece will pay not more than 3.5%, while creditors are pushing for more than 4%.
• The Greek talks are now expected to be concluded by the end of this week and with a lot of Eurozone data the euro could see more positive movements.
• Although the US Dollar sustained losses yesterday, it consolidated against its leading counterparts in overnight trade.
• Brazil will make room for a more “flexible” monetary policy as the government seeks to ensure economic growth of at least 4% this year. President Dilma Rousseff said he will cut enough of Brazil’s 2012 budget to ensure the government meets its target of a budget surplus before interest payment of 139.8bn reals ($79.7bn).
• Spanish economy minister Luis de Guindos said Spain is sticking to its deficit goal even as the economy shrinks, underlining a rift in the month-old cabinet whether the nation can halve its shortfall during a recession.  De Guindos said Spain’s government has an “absolutely inescapable commitment” to austerity, when asked whether he agreed with Budget Minister Cristobal Montoro’s call on Jan. 22 for the European Union to ease Spain’s 2012 deficit goal to take the shrinking economy into account.
• India’s rupee rose past 50 a dollar for the first time since November as the central bank left borrowing costs unchanged today to support economic growth.  The Reserve Bank of India kept its benchmark rate at 8.50% at 11 a.m. in Mumbai. The central bank cut the cash-reserve ratio for banks to 5.5% from 6%.

DATA TO LOOK OUT FOR (all times GMT)

• A host of flash Manufacturing & Services data from Europe this morning. Both French & German sets of services data have shown a increase in confidence.
• Eurozone Industrial New Orders are released at 10.00amg a contraction of 2.1%.
• UK Public sector net borrowing forecasted at 12.4bn from a higher figure of 15.2bn seen in December.
• Core retail sales in Canada at 1.30pm, they have seen steady sustained growth in this sector in the last three months and are expecting another modest figure of 0.2% growth today.
• Bank of England Governor Mervyn King speaks tonight at 8pm in Brighton.

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

·         On Friday, PMI Construction comes in at 52.3 for November which is lower than the previous release but higher then market expectations the data was of little interest to the markets.

·         Sterling falls from the early day’s high of €1.1658 against the euro during the afternoon to a session low of €1.1599, before recovering and then spent most of the day trading around the €1.1630 level.

·         The pound rallied in the morning against the US dollar but fell back during the afternoon to trade between $1.5725 and the low of $1.5576 after investors booked profits on move higher in riskier currencies.

·         Concerns grow that the UK economy looks vulnerable to a fall as a result of the Eurozone debt crisis with Mervyn King advising UK banks to build capital to insure against the “exceptionally threatening “ situation developing. .

·         Speculation mounts in some camps the Bank of England may take additional steps this week to stimulate the ailing economy in the form of quantitative easing, which is currently standing at £275 billion. 

·         This morning PMI Services data in the UK was better than expected at 52.1 against expectations of 50.7, the services sector accounts for 75% of UK GDP.

ELSEWHERE

·         The euro rose after a proposal to channel central bank loans through the IMF which may deliver up to €200bn to help control the regions debt crisis. Under the proposal, national central banks would recycle funds through the IMF, potentially to underwrite lending for Italy and Spain, the two most vulnerable countries right now.

·         There have been four rescue packages over the past 19 months which have all failed to control the Eurozone debt crisis which fuels speculation that the single currency might break up unless European leaders forge a united front.

·         German chancellor Angela Merkel called for European treaty amendments to create automatic court enforced sanctions on countries that overstep limits of 3% of GDP on deficits and 60% of GDP on debt.

·         Concerns still mount that Spain will be next to have their credit rating downgraded.

·         The Swiss franc fell for the third day in a row after Switzerland said it may consider additional steps to support the country’s central bank in its ongoing battle against the currencies appreciation. 

·         US unemployment dropped to 8.6% on Friday, its lowest level since March 2009 from 9.0% in October. US Non Farm payrolls climbed by 120k coming in roughly on par with estimates of 119k. Adding to the positive news, October’s NFP figure was revised upwards to 100k.

·         The euro fell sharply against the US dollar on Friday afternoon to hit a session low of $1.3374

·         Thursdays ECB interest rate decision will be important, suggestions are the markets are currently pricing in a 25 basis point rate cut. The euro’s seemingly unfazed strength over the last year has been largely due to higher rates, if a cuts continue into 2012, the euro will rely more heavily on data announcements and sentiment about the health of the Eurozone may have more of an effect.  

DATA TO LOOK OUT FOR (all times GMT)

·         German Chancellor Merkel and President Sarkozy meet today again to discuss in more detail the proposed rescue packages for the Eurozone.

·         European retail sales is released at 10am which is expected to rise to 0.2% from -0.7%.

·         US ISM Non-manufacturing for November is released at 3pm along with Factory Orders for October.

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

• GBP/EUR was dominated by the anticipated stalling of today’s EU summit which saw the currency pairing hit 1.1529.

• Sterling is expected to face headwinds as the BoE remained dovish in keeping the door open to expand asset purchase beyond 275bn. MPC chairman Mervyn King stood behind the second round of quantitative easing, citing a subsequent shift in risk sentiment as subdued wage inflation dampens outlook for inflation. Further, as the BoE recognises an increasing likelihood of undershooting their 2% inflation target, QE measures may continue into next year to dissipate the threat of a dreaded double-dip.
• The latest UK current account data released yesterday suggests a shrink to the lowest deficit in 3 years. However, this is understood to be a result of investment surplus rather than an improvement to the trade deficit. Many households have reduced their outgoings with a view to deleveraging debts; an unsurprising responsible reaction in the lingering shadow of recession.
• GBP/USD spent most of yesterday sitting around the 1.60 level briefly hitting a high of 1.6038 before recovering. If EU leaders manage to come up with a viable solution to the European debt crisis this should create a “risk on” approach therefore weaken the safe haven dollar and causing GBP/USD to strengthen.
• According to British Banker’s Association (BBA) the number of home loans in September dropped slightly to 33,130 while repayments on personal loans and overdrafts outstripped new borrowing by £212M

 ELSEWHERE

• Three weeks after the FT reported that EU leaders would convene to discuss resolution of the Eurozone debt crisis, market participation has been exceptionally low with investors waiting on the side-lines for today’s decision: A disappointing summit could see the euro give back this month’s gains. The markets hope for substantial progress has certainly been stymied as members continue to service their own motives.

• Silvio Berlusconi’s cabinet opposed additional steps to balance the Italian deficit even as the EU called for further measures. Berlusconi must deliver a convincing plan as a precondition of further Italian bond purchases by the ECB. The media mogul may be just as worried by claims from junior coalition party leader Umberto Bossi warning that Italy’s government could collapse if pension reforms are not agreed by today.
• Bearish sentiment was compounded late in the day as reports claimed EU ministers will not announce new measures after the summit but continue to work for resolution and ECOFIN will not even meet today, but an emergency meeting of EU heads of state will still take place.
• It seems the package will include the ECB’s asset purchase plan with the central bank possibly continuing to expand its nonstandard measures into the New Year as policy makers become increasingly reliant. As a result, the consideration of future policy may see a dampening appeal for the Euro.
• Credit rating agency Fitch yesterday commented on the Greece debt crises saying that a “Greek default is inevitable.” Surely not comments welcomed by EU heads of state ahead of the EU Economic summit today.
• Canada fulfilled expectations by maintaining 1% interest rates but lowered growth forecasts in anticipation of the economy operating below full capacity for another 2 years causing CAD to weaken

DATA TO LOOK OUT FOR (all times UK BST)

• EU leaders will gather for an emergency meeting in Brussels today with an announcement now expected tomorrow.
• 13:30 Core durable goods orders. Consensus expects a reading at 0.5% with a higher reading strengthening the dollar
• 16:15 Bank of Canada press conference. This will explain yesterday’s decision to keep interest rates on hold
• 21:00 New Zealand interest rate decision. Rates are expected to remain on hold at 2.5%

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.