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).

Data on Wednesday showed UK industrial order expectations had fallen more than expected

in July. In a report by the Confederation of British Industry, industrial order expectations

declined to - 10.0 in July, compared to a 1.0 reading back in June. Analysts had expected a

decline in July to - 3.0 in July.

A reading above 0.0 indicates increasing order volume is expected, whilst below indicates

expectations are for lower volume.

For the first time in two years, optimism regarding the general business situation fell among

UK manufacturers and expectations of slower activity are driving a reappraisal of forward looking

business plans. Growth in total orders and production eased slightly in the three

months to July and manufacturers expect a further deceleration over the next quarter.

Commenting on the report, Ian McCafferty, CBI Chief Economic Advisor, said “This slowdown

is expected to persist into the third quarter. How far the slowdown will be borne out is yet

unclear, but the combination of political and economic uncertainty is sapping confidence.”

Over in the USA, official data showed that US durable goods also fell unexpectedly in June.

The Commerce Department said durable goods orders dropped 2.1%, led lower by a decline

in orders for transportation equipment, after a 1.9% increase in May. Analysts had expected

orders to rise by 0.4% in May. Excluding transportation, orders edged up 0.1% after gaining

0.7% in May.

The pound still remained supported as talks on raising the US debt ceiling remained at an

impasse, adding to concerns over a possible US debt default or downgrade ahead of the

August 2nd deadline.

The euro weakened earlier yesterday, also, amid fears that the Eurozone’s bailout fund may

be insufficient to prevent sovereign debt contagion after Wolfgang Schaeuble, the German

Finance Minister, said that Berlin was against a “blank cheque” for the European Financial

Stability Facility to purchase bonds on the secondary market.

Late in the afternoon, EUR/USD dropped sharply back below the 1.44 as a failed topside rally

earlier in the day, saw a few weak longs start to bail. Risk-off is also increasing further as the

Dow Jones maintains its triple-digit losses, whilst players are likely rolling their eyes at more

worrying news that Unicredito shares have been suspended again, due to the excessive

volatility of the markets.

Jean-Claude Trichet was trying to boost sentiment and argued that speculating over a Greek

default will lead to heavy losses given the provisions put in place last week. He was also

heard to have said that the EMU has fewer problems than the US and Japan, adding that

they must address their public finances.

IN THE UK

• UK CBI shows a more than forecasted decline in July, falling to -10 this month from +1 in June, well below forecasts for a reading of -2
• Industry experts expect the slowdown in manufacturing to continue over the coming months.
• Quarterly manufacturing data, indicated the first drop in firms’ optimism for two years, as export demand weakened sharply
• The pound hits a high of $1.6438 against US dollar and €1.1364 against the euro

ELSEWHERE

• Still no resolution on US debt ceiling talks, just 5 days to go, who is going to stand down?
• US June Durable goods orders fell 2.1 percent, weighed down by weak receipts for transportation equipment, after a 1.9 percent increase in May. Economists had expected overall orders to rise 0.3 percent
• US Treasuries prices pared earlier losses on the data, while the dollar extended losses against the yen
• Euro weakens amid fears that the euro bailout fund may be insufficient to prevent sovereign debt contagion
• Switzerland’s leading economic barometer fell more than expected in July, posting the largest monthly decline since April 2009. The KOF Economic Research Agency said its index of 12 leading indicators declined to 2.01 in July from 2.23 in June.
• Australian CPI for the 2nd Quarter climbed 0.9%, stronger than expectations of a 0.7% increase, RBA are to announce rate decision next week, some think after the climb in inflation there could be a 25bps rise in interest rates which will undoubtedly help to strengthen AUD further.
• Overnight Reserve Bank of New Zealand leave rates on hold but suggest they will reverse the 50bps emergency cut following the NZ earthquakes as soon as September.

DATA TO LOOK OUT FOR

• UK CBI Reported Sales for July are due out at 1100am, so interesting to see how this fares
• 1.30pm we have the US Unemployment claims which is expected to come out at 413K. Will this figures be under expectations??
• The US also has Pending Home Sales due out at 1500pm, forecasted to show a reading of -1.5%
• Later this evening, we will have the NZD Building Consents, month on month.
• A plethora of Japanese data is released tonight, Industrial Production, Unemployment, Consumer Price Index, Manufacturing Purchasing Manger Index, on the whole, looking at the consensus figures, markets are expecting the majority of the figures to fall.

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.

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.

Sterling started the week on the front foot making gains against the US dollar and the euro off the back of rumours that higher inflations data (released today) could trigger the Bank of England to raise interest rates in the first half of this year.

Sterling was further buoyed against the euro after the single currency’s recent rally ran out of steam as investors remained unconvinced that enough progress was being made to improve the euro zone debt problems.

At 5.00pm yesterday sterling was up 0.2% on the day against the US dollar at $1.5909 having risen to a high of $1.5955 its highest since the end of November.

Against the euro sterling was also doing very well, up nearly 1% on the day trading at €1.1964 having risen as high as €1.1976 earlier in the day.

Markets are awaiting the UK CPI data released at 9.30am today; this reading is expected to give more evidence of high inflation.

Markets are expecting a 3.3% reading year on year for December. A figure like this would put pressure on the Bank of England to discuss raising rates in a move that would be designed to curb this increase in inflation despite some calling for a the Bank of England to keep rates on hold.

Ernst & Young ITEM Club predicts that the consumer price index, the government's preferred measure of inflation, will peak at nearly 4% in February causing the Bank of England to increase interest rates from the current level of 0.5%.

"A premature rate rise would boost the pound, weakening the UK's ability to increase its exports, which we have long maintained hold the key to the UK's economic recovery," said ITEM's chief economic advisor.

The rumours of higher inflation have already driven sterling up over the past few trading days, however there may still be some sterling strength to come.

The euro zone is a very similar situation with Jean Claude Trichet’s comments about keeping a close eye on inflationary pressures on Thursday sparking market talk about a possible rate hike in the euro zone, and took the euro sharply higher against the dollar.

With the rate hike in the UK seen by markets as likely to happen sooner than in the

Euro-zone expects the volatility to continue in the short term.

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.