driver

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).

Although yesterday saw very little Economic Data released, markets remained volatile as

uncertainty and risk based trading dominated trading.

Sterling made gains to €1.1544 against the Euro, pushing close to the 2 month high €1.1554,

but this was put down to Euro weakness as the ECB’s idea to buy back Spanish and Italian

Bonds is deemed by investors to be just a short term solution. Analysts are unsure as to how

long the ECB can go on purchasing bonds to support countries experiencing financial

difficulties.

Many think that the Euro could weaken further as worries over France’s sovereign rating

looks bleak. France are currently looking at insuring their debt, but the recent downgrade

for the US which saw it lose its AAA status has meant that the cost to insure for France has

rose sharply.

Against the Dollar, sterling had a mixed day initially rising to $1.6471, a near 2 month high.

However as the risk aversion kicked in, and investors opted for the ‘still’ safe haven USD, the

pound fell to $1.6298 before recovering to $1.6350 as Stop Losses were triggered around

$1.6310.

The big picture for the US looks bleak at the moment although some of the day to day data

like a drop in unemployment has given some hope across the pond. At 19.15 today the

FOMC meet to discuss interest rates for the first time since their downgrade, and investors

will be looking for any indication of where they feel the economy will head over the next few

months.

Overnight RICS House Price data for July showed a better than expected figure, moving from

-26 in June to -22 in July, consensus was expected at -25.

The main focus for the UK will be on the BoE quarterly inflation report on Wednesday, and

the pound will be under pressure if the BoE cut its growth forecast. The main data for the

UK today is Manufacturing and Industrial Production which has been estimated to fall from

1.8% in May to 0.3% in June.

IN THE UK

• Sterling pushes to a near 2 month high €1.1544 but has a mixed day against the dollar with a range between $1.6298 and $1.6471.
• Quiet day overall for UK data as the pound relied on risk related trading
• Investors eyes focus on BoE quarterly inflation report tomorrow and whether they cut the growth forecast
• Overnight RICS House Price data for July showed a better than expected figure, moving from -26 in June to -22 in July, consensus was expected at -25.
• FTSE currently trading at 4.4% down already.
• Manufacturing and Industrial Production figure show declines across the board this morning, all figures were worse than expected.

ELSEWHERE

• Equity markets continue to fall, S&P finishes 6.66% down and the DJ down 5.5%
• Credit rating agency Moody’s confirm they are leaving the US unchanged at the time being.
• France's AAA rating looks under threat, as the cost to insure their debt rises sharply after the recent US downgrade.
• ECB continue to buy back Spanish and Italian Bonds, however investors do not feel this will be a long term solution as this type of support cannot be sustained for countries facing financial difficulty.
• JPY and CHF still continue to hold strong despite attempts by both their central banks to weaken their currencies with intervention.
• Overall picture for the US looks bleak, however day-to-day data has been better than expected with recent unemployment figures falling.

DATA TO LOOK OUT FOR

• UK Trade balance is expected to show a slight improvement from £-5.109b to £-4.8b for June
• UK NEISR GDP Estimate results are published at 3.00pm, the data is an estimate of growth in the last 3 months before the official GDP figures are released. The report is generally seen as very reliable and can influence monetary policy. The last figure published was 0.1% and any surprises either to the up or downside could have a fairly dramatic effect on the pound.
• This evening at 7.00pm the Fed Interest Rate Decision meeting will reveal US monetary policy for the near term future, interest rates are expected to stay at 0.25% and QE3 is unlikely to start today but the following press conference will provide us reaction to the recent S&P ratings downgrade and where the US want to head from here. There is the potential for overnight volatility throughout the currency markets in all pairs as risk is a big driver over recent weeks.

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 or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension, 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, QROPS and now QNUPS (Qualifying non UK Pension schemes).

The pound made gains against a basket of currencies yesterday ahead of the consumer price

index (CPI) announcement which showed inflation to be unchanged from April at 4.5%. Hawkish remarks made by Bank of England policymaker Martin Weale in a speech in

London was the main driver of sterling’s rise according to Reuters.

Weale called for interest rates to be raised sooner rather than later, which would eliminate

the need for tightening to be rushed in the long term. Sterling managed a 0.3% rise against

the dollar hitting 1.6441, before dropping back slightly and spending most of the day trading

around the 1.64 level.

The May CPI figures showed that food was the biggest upward pressure on inflation, while

the transport services offered the most significant downward movement. The deputy head of FX research at Credit Agricole, commented: “The Bank of Engfland has already talked

about inflation being at 5% at some point in the future so anything edging upwards

towards that level will not cause too many ruffles”

Sterling also made gains against the Euro helped by Weale’s comments and the ever looming

Greek debt crisis, helping GBP/EUR hit a fresh one week high of 1.1380.

Elsewhere across the pond we saw US retails fall in May for the first time in almost a year,

due in large part to a sharp drop in car sales official figures showed. Sales fell 0.2% from the

month before to $387.1bn, car sales fell 2.9% partly due to supply issues caused by March’s

earthquake in Japan. Despite this fall analysts said the said the sales were better than

expected and highlighted the increased spending against a year ago.

This weak figure caused the dollar to weaken against a basket of currencies damping the

demand for safe haven currencies, the dollar did however make gains against the Swiss franc

and yen. The dollar fell 0.4% to $1.4475 against the euro.

IN THE UK

• The pound strengthens as Martin Weale calls for interested rates to be increased, to avoid the need for rush tightening in the long term and sterling hits a week high against Euro at 1.1384 and GBP/USD hits 1.6441
• UK CPI inflation remains at 4.5% for May
• The pound is helped this morning by surprisingly high consumer UK confidence figures released overnight, the figure of 55 was far higher than the consensus of 41.

ELSEWHERE

• Greece debt issues continue to be a big influence on the markets. No agreement has been reached and different options are splitting officials across Europe.
• ECB governing council member Mario Draghi said he shares the ECB’s opposition to a restructuring of Greek Debt saying the costs would outweigh the benefits
• Eurozone Finance Minsters set to have an additional meeting on Sunday as well as planned Monday appointment to try to seek a suitable arrangement and Merkel and Sarkosy arrange to meet June 17.
• Moody’s are on the downgrade prowl again, this time it’s French banks SocGen, BNP, Credit Agricole who are at risk because of their direct exposure to the Greek crisis
• Dollar rises against the Yen and Swiss Fran ahead of US retail sales and maintained strength as the figures published were slightly better than expected.
• Swiss Franc falls as Government lowers its forecast for 2012 economic growth and says further currency appreciation poses a risk to its outlook

DATA TO LOOK OUT FOR

• UK unemployment out at 9.30am, a rise will weaken the UK economy and therefore have a negative effect on sterling
• Eurozone industrial production, this report measures the change in total inflation. When the result is higher it tend to have a positive impact on that currency
• At 1.30 the US Empire State Manufacturing
• US industrial production is out at 2.15pm, like the Eurozone when the result is higher it tends to have a positive impact on that currency

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 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 lost ground against a host of major currencies yesterday, most notably the Euro and the Dollar. Sterling struggled following positive US data which triggered market orders which were exaggerated by thin trading conditions. 

Sterling was also under pressure following an unexpected slowdown in UK consumer inflation in July which contributed to the downward pressure on sterling. 

Annual UK CPI slowed to 3.1% in July from 3.2% in June. The reading was the lowest since February, but was the eighth straight month that it has exceeded the Bank of England's 2% target. Of particular interest now to people with final salary pension schemes on which future indexation of deferred benefits and pensions will be based. 

However Inflation is still above the Bank of England’s inflation target of 2% and Mervyn King was quick to point out that the slowdown was due to temporary factors. King said in his letter to the finance minister which is required when the reading is above 3% that that higher inflation was due to a rise in value-added tax, higher oil prices and a weaker currency. He also mentioned that in the medium term the readings were likely to be similar with inflation close to or just below target. 

Analysts said that the numbers were not likely to change the dovish stance of the Bank of England. 

The afternoon trading was in contrast to the morning yesterday with sterling pushing $1.57 in the morning but being turned on its head after lunch with the outlook turning from positive to negative. 

By 16.00hrs sterling had fallen 0.5% on the day versus the US Dollar to $1.5585 having fallen as low as $1.5563. Traders reported selling from a major US bank on the down side of 1.56 as a key driver within the thin trading conditions. 

The outlook for sterling is looking much less positive against the US Dollar, however traders said that if sterling can remain above 1.55, its 200 day moving average, it would remain supported. 

Against the Euro sterling was also trading lower. Sterling lost 0.8% in trading yesterday falling as low as €1.2108 dropping away from a recent high of 1.2247 hit on Monday. Sterling continued its fall this morning dropping through the 1.21 level bottoming out this morning at €1.2070 with traders eyeing further possible losses. 

The Euro was also given a helping hand by Ireland after they managed to sell €1.5b in government bonds even as investors remain concerned about the country's banking sector, which suggested improving risk appetite. 

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.