Chancellor

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

• Sterling initially rose against the euro yesterday after Greek politicians struggled to agree on bailout terms which increased concern over the sovereign debt crisis and made investors return to safe haven assets, the pound rose from the session low of €1.2033 to reach the high of €1.2099..
• Sterling initially lost ground against the US dollar in early trade but retraced its losses in the afternoon moving away from the low of $1.5729 to end the session near the high of $1.5840.
• Concern mounts that even though the UK has seen a recent run of stronger-than-expected economic data which has supported sterling, this may be not be enough to dissuade the BoE policy members from announcing an increase in QE at their monthly policy meeting on Thursday.  

ELSEWHERE

• The deadline set for the Greek government yesterday to agree terms of a second bailout was missed. They must now give a decision before Eurozone finance ministers next meet. Despite missing deadlines the euro continues to find support and a new “final” deadline still seems to be next Monday, if we don’t have progress by tomorrow a break below $1.30 against the US dollar seems likely.
• French President Sarkozy and German Chancellor Merkel presented a united front yesterday, proposing the setting up of an account for Greece’s interest payments to guarantee lenders are paid in full.
• Moody’s investor services said that the outcome of the EU summit in January failed to encourage an improved outlook for the Eurozone and highlighted the risk for contagion as the region faces additional credit rating downgrades in 2012.
• The ECB are expected to maintain a dovish stance at its monthly rate decision meeting held on Thursday as speculation mounts we may see another interest rate cut.
• A Eurozone recession could almost halve Chinese growth this year, according to the IMF Chinas economy will grow by 8.2% this year but warns a recession in the Eurozone could cut this to 4.2%. Beijing should get ready to inject billions of USD into the economy to fend off any downturn. .
• BOJ Shirakawa has commented saying that current deflation and the Yen strength are very ‘severe’ and that steady policy needs to be implemented by investigating economic conditions.
• JPY weakened for the third time in four days against the dollar and euro as government data showed Japan carried out so called stealth intervention to weaken the currency in November, Japanese Finance Minister Jun Azumi said he won’t rule out any options to curb the currencies appreciation.
• In late trade yesterday the US dollar weakened significantly, falling over a cent to 1.3136 against the euro, a fall mirrored against the pound. Reports surfaced that the US debt situation is ‘Very Serious’ and ‘Crisis Mode’ could develop quickly.
• Perhaps the most surprising news of the last 24hrs is Australian central banks decision to leave interest rates on hold at 4.25% at 3.30am (GMT) this morning. With less than ideal employment, retails sales and housing market conditions, the markets were fully expecting a drop to 4.0%. The drop never emerged and AUD has strengthened by up to 1.0% against all of the majors pairs. GBPAUD now trades at 1.4650 and AUDUSD is just under 1.08.

DATA TO LOOK OUT FOR (all times GMT)

• Another fairly quiet day of data today and markets again will be driven by developments in the Eurozone.
• Germany release industrial production at 11.00am which is expected to rise for both MoM and YoY.
• The US releases consumer credit change for December at 8pm this shows the amount of money that individuals borrow, this is expected to fall to $7.30B from $20.37b previous.
• Meanwhile, in the absence of US data today, the only key event in the US is Federal Reserve Chairman Bernanke’s testimony to the Senate Budget Committee. We expect him to maintain the Fed’s dovish tone regarding the US economic outlook, despite the stronger than expected January non-farm payrolls.  
• At 11:30pm Australia releases Westpac Consumer Confidence for February.

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).

The Bank of England voted unanimously to keep rates on hold earlier this month, but they have not ruled out the possibility of further quantitative easing.  GBP improved against both USD and EUR yesterday and into the early hours of this morning (against EUR it was not by much, but sterling it determined to entrench itself in the new rate of 1.1850 and above).  Given the correlation between GBP, USD and EUR I believe that improvement against the greenback signals something of an increase in marginal risk appetite, and from that we may see a fractional loss on GBP/EUR…or rather, had the BoE not come out to assure the market it would release emergency funds to protect UK banks, I would have expected a slight lessening of aggression from the pound.

IN THE UK

• UK Chancellor George Osborne cuts UK growth forecasts for the next four years and says borrowing costs will rise by £111bn, as he warned the Eurozone could drag the UK into recession The pound pushed to a week high €1.1723 from the day low €1.1613 as the euro was sold off.
• Sterling holds firm against the US dollar as most of the bearish news from George Osborne’s statement has already been factored in, this helped sterling hit a one week high of $1.5655 on Tuesday
• Osborne also warns that Britain faces two years extra years of austerity as he sought to shore up his deficit-reduction plans, intensifying a conflict with unions that will stage a mass walkout.  
• Fitch warns that more shocks from the UK would seriously test its triple A credit rating. The top tier credit rating has been supporting healthy demand for UK Gilts; a downgrade would have serious implication for government debt management, reverse the UK’s recent safe haven status and place the pound under extreme pressure.    

ELSEWHERE

• Eurozone finance ministers agree ways to boost the strength of Europe’s bailout fund and have raised the possibility on the IMF getting more resources in order to help Eurozone countries that have been struggling to raise funds.
• The US dollar falls across the board yesterday as commodity currencies continued to rise amid improved risk appetite helped by a surprise rise in consumer confidence.  
• Following a five-hour meeting, ministers also agreed to release the €8 billion Greece needs to avoid bankruptcy and took the first steps to approve the next €8.5 billion tranche of Ireland's bailout
• The Australian and New Zealand dollar continued to rally in London trading, the AUDUSD rose above parity to reach $1.0021, a rise of 1.3%, the New Zealand dollar rose 1.1% to $0.7627
• The euro found support against the US dollar on Tuesday as the Italian bond auction goes well, selling €7.5bn debt at auction, though its costs reached euro area highs, EUR/USD has hit a high so far this morning of 1.3358
• The SEK and NOK gains sharply against the Euro, the SEK was helped by a massive export led 1.6% rise in Q3 GDP, Norwegian GDP growth was also higher in Q3.
• This morning German Unemployment falls dramatically by 20k, helping the euro recover some of yesterday’s losses against the pound.  

DATA TO LOOK OUT FOR (all times GMT)

• Eurozone Employment Rate is released at 10.00am and forecast to show no change from last month at 10.2%
• Eurozone Core CPI data is also released at 10.00am, last month figure showed inflation was at 1.2%.
• US ADP employment for November is due out this afternoon and is expected to come in at 131k, beating last month figure of 110k.
• US Non-Farm Productivity is release at 1.30pm along with Q3 Canadian GDP.
• The Fed’s Beige Book is released at 7.00pm and will give a very clear picture of US economic conditions. There have been some positive data releases in the US recently so if the results carry a more optimistic tone, risk appetite could be helped overnight.

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

• Asking prices for a property in the UK declined for the second consecutive month in December, the latest survey by Rightmove showed early this morning. The Rightmove House Price Index, a leading indicator of residential property prices in England and Wales, dropped 2.7% (MoM) in December, following a 3.1% fall in the previous month. Annually, asking prices rose 1.5% in December compared to 1.2% increase in the previous month.                                                                                                                                                            

• GBPUSD was around the $1.549 area this morning as dollar continued to receive safe haven status as the European solution looking less and less likely in the medium term.                                                                                               

• Against the euro, sterling has found some relative safety as a 'buy only' pair and on Monday morning continued to hover around the €1.19 level.

ELSEWHERE

• On Friday, Fitch become the latest ratings agency to cut its outlook on France's AAA rating and said it might downgrade the ratings of Italy, Belgium, Ireland, Spain, Slovenia and Cyprus blaming any comprehensive solution to the European debt crisis.

• Fitch also downgraded the long-term credit ratings on six major banks including US banks Goldman Sachs, Bank of America, Morgan Stanley. Fitch cited the issues facing the banking sector and the exposure these banks have to the European debt crisis.

• Fellow rating agency Moody’s downgraded Belgium’s sovereign credit rating by two notches from Aa1 to Aa3.

• Italy's new government won a crucial confidence vote, paving the way for sweeping austerity. However, Italian Prime Minister Mario Monti took a veiled swipe at German Chancellor Angela Merkel for the pound of flesh demanded in return for financial help. Monti said the sovereign debt solution "should be wrapped in a long-term sustainable approach, not just to feed short-term hunger for rigor in some countries," in reference to Germany's insistence on crippling austerity measures for big debtors.

• The Eurozone Trade surplus fell to €1.1bn in October from €3.1bn in the same period of last year, Eurostat said Friday.

• The US Dollar held its ground versus the euro on Friday, bouncing back from modest early losses after Fitch became the latest ratings agency to warn on some key European nations. EURUSD this morning was not far from Wednesday's 11 month low of $1.2944, currently $1.3010.

• US consumer prices held steady in November in news overshadowed by the Eurozone on Friday. The consumer price index for November was unchanged from October levels, which showed a 0.1% decline from September. Most economists had predicted a slight, 0.1% increase in the cost of consumer goods.

• The Reserve Bank of India on Friday opted to maintain its key rate unchanged, thus stalling a rate-tightening spree, in a bid to support the depreciating rupee. The central bank headed by Governor Duvvuri Subbarao maintained the repo, the rate at which it lends to banks, at 8.50% and the reverse repo, the rate at which the central bank borrows from banks, at 7.50%. Economists had anticipated the decision, as inflation has slowed and industrial production dropped for the first time in more than

two years.

• On Sunday night North Korea's state leader Kim Jong-Il passed  away after suffering a heart attack. The most exposed currency pair is USDJPY which rallied from 77.86 to 78.16 upon the news but didn't last long and retracted back below the 78 level. The US dollar was initially bought up on the political uncertainty.

DATA TO LOOK OUT FOR (all times GMT)

• At 3.30pm, ECB President Mario Draghi is speaking before the European's Parliament's Economic and Monetary Committee in Brussels

• GBP Consumer Confidence is out later today which is a leading indicator of consumer spending. The figure is expected to show a fall from 36 to 34 as conditions tighten up.

• Overnight in Australia we have the Monetary Policy Meeting minutes which shows a

detailed record of the Reserve Banks most recent meeting, Australia’s interest rate

was cut from 4.5% to 4.25% in the first back to back reduction since 2009.

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.