purchasing manager

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).

Sterling began Wednesday morning on the front foot as it briefly hit a two month high

against the Euro. Traders put this positive movement down to concerns that the European

debt crisis could creep over into larger economies such as Spain and Italy. A further

acceleration against the single currency was restricted by a strong demand from UK

importers to purchase above the 1.15 level. Another stumbling block came in the form of

EUR/CHF strength, which derived from the Swiss National Bank announcing measures (in the

form of an interest rate cut), to slow recent appreciation in its currency.

“Sterling is essentially reacting to everything else going on…it is a play between major

currencies and is being pulled between them, said an economist at AIB

Group Treasury in Dublin.

Investors have found it hard of late to have a sustained interest in the Pound. The

International Monetary Fund commented on Monday that more quantitative easing may be

required to kick-start growth in the UK economy. This is an opinion shared by many in the

market as the disappointing data releases of late have been the norm.

The release of the PMI Services data came as a welcome relief to the recent trend of

economic information emerging out of the UK. The figure surprised analysts who had

expected a slowdown in activity. It rose to 55.4 in July from 53.9 in June (a figure above 50

indicates growth). A slight negative could be taken from a cut in jobs within the service

sector, especially as the previous two months had enjoyed an increase in employment. The

strongest increase in activity in services was seen in the Business Services and IT sectors

whereas hotels, catering and restaurants saw their growth slow.

“Yet again it’s the segments most exposed to consumers’ lack of disposable income that

suffered most, and all businesses are being hit by inflation and rising utility bills,” said the Chartered Institute of Purchasing and supply.

The Pound reacted positively to the data release, most notably against the U.S. Dollar. With

only a few minutes remaining before the close of the day, GBP/USD had hit a high of

$1.6474, a fingertip away from a two month high of $1.6477 (achieved earlier in the week).

The Greenback was pushed in all directions by the release of both positive and negative

economic data. MBA Mortgage Applications were seen as a positive as was the ADP

Employment Change. The negatives arrived in the form of a fall of 0.4% in the Factory

Orders and a change of 1.3M in EIA Crude Oil Stocks. A sigh of relief was heard across the

pond as President Barack Obama signed legislation to increase the US debt ceiling, thus

averting a financial default. It raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn and

makes savings of at least $2.1tn in 10 years. The resolution of the stand-off, failed to inspire

financial markets as the Dow Jones has fallen consistently for eight straight days. Credit

rating agency Moodys reacted by placing the US’s credit score as under a negative outlook.

The market will now look to the unemployment figures released out of the States on Friday

as an indication for near-term Dollar movement.

IN THE UK

• PMI Services data unexpectedly shows UK services sector grew last month and is at 4 month high. Growth is  seen in the Business Services & IT, whilst a fall recorded in the hotels and restaurant sector
• GBP/USD rises to 8 week high at 1.6405 whilst GBP/EUR falls, but still close to earlier 2 month high.
• Pound jumps vs. Swiss Franc after SNB interest rate announcement.
• The pound remains over comfortably over 1.50 against the strong AUD just breaking the 1.5400 mark as I type.

ELSEWHERE

• Overnight the Yen tumbles as the Japanese Government and central bank intervene to help reduce its value, currently we are seeing this working well as the yen has depreciated by over 3.0% against a number of currencies since the London market opened.
• The Bank of Japan has increased their asset purchase fund from 5 trillion Yen to 15 trillion Yen to help the economy after the recent natural disasters.
• US ISM Non Manufacturing follows the earlier release in the week and show another decline.
• The SNB have acknowledged the Swiss Franc is uncomfortably high and drop their interest rates to 0.25% to help weaken the currency. This morning it appears to have worked to some degree.
• Purchasing Manager Index Services (Jul) from Germany saw a retreat to 52.9 from the 56.7 seen in June.  
• The Euro found some unusual support from the Swiss National Bank, as appetite increased off the back of the rate cut announcement.
• Dow Jones down for eight straight days.

DATA TO LOOK OUT FOR

• Headline data today is the release of the both the BoE’s and ECB’s interest rate decision meeting results. Both central banks are expected to leave rates on hold at their respective 0.5% and 1.5% but rumours have been circulating about the slim possibility the UK may increase their quantitative easing package from its current £200bn, the markets have not priced in this in and if it does transpire the pound will sustain heavy losses, however the chances are very low.
• ECB Press Conference held by Jean Claude Trichet after the ECB rate decision may reveal some surprises to Eurozone policy.
• At 1.30pm US Continuing and Initial Jobless claims are released. Both figures may help to reveal how tomorrow far more important Non Farm Payrolls release may go.  

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).

Quite a rich vein of data out yesterday, but none of which were too

positive for either continent. First off, were the figures from the Eurozone, where the PMI

manufacturing fell to a seven-month low in May. The data showed it fell to

54.6 for last month from 58 in April. The initial estimate had been 54.8.

This was the sharpest decline since November 2008.

The report, compiled by the London data provider, Markit, said that in all

the countries covered, the purchasing managers indexes “signalled a

broad-based slowdown in the pace of recovery,”

This was coupled with the same data, but from the UK, which showed May

manufacturing had also fallen, significantly below forecasts of a reading of

54.1. It actually came out at 52.1 last month, from a downwardly revised

54.4 in April. Mortgage approvals, again, unexpectedly fell to their lowest

level since December, continuing the downward pressure on sterling.

“The whole slew of economic data out of the UK has been pretty poor. It

makes it much more difficult for the market to think that the Bank of

England will hike rates any time soon. The recovery is not compelling

enough to justify it”, said the head of FX Strategy at Credit Suisse.

Markets are now almost pricing in a rate rise by the Bank of England in February 2012.

Over in Europe again, one positive bit of information was Greece nearing a

deal with the EU and IMF to avert a near-term default, pushing the single

currency to a one-month high on Wednesday. Two conflicting articles,

however, have trapped EUR/USD in the 1.4400 to 1.4460 range. The first

was a Greek article that reported that the EU/IMF’s new rescue program

was just around the corner. The counter article was from the German

newspaper, FAZ, which commented saying that the IMF will not pay its

share of the 5th tranche aid to Greece. Interestingly, German economic

advisor, Peter Bofinger, quickly responded to the news with a statement

that the EU would step in to fill any gaps which were left by the IMF. As we

near the deadline in mid-July – when Greece runs out of cash – we suspect

that the majority of credible stories, rumours and comments will lead

towards a near term EU/IMF cash infusion, which, if correct, will be broadly

positive for the EUR.

Across the seas, we had US ADP Employment figures, which really

surprised to the downside at only +38,000. The smallest increase since

September 2010, from a revised 177,000 in April. The bulls are already

claiming this bad data is due to the Japan situation and supply chain

stocks from the March earthquake and tsunami.

Manufacturing also showed a slowdown, where the pace of growth had

slowed more than expected to its lowest level in more than one and a half

years.

The Institute for Supply Management said its index of national factory

activity fell to 53.5 in May from 60.4 the month before. Expectations were

for a figure of 57.7 and was the lowest level for the index since September

2009.

IN THE UK

· Sterling falls, stung by disappointing UK PMI, which fell to 52.1, well below

expectations of 54.1

· Sterling hits a low of €1.1352 against the euro and $1.6375 against the US dollar

· UK mortgage approvals also fell unexpectedly to its lowest level since December 2010

· Bank of England expected to keep rates on hold this year and markets already pricing

in the first rise in February next year.

ELSEWHERE

· Eurozone manufacturing PMI fell to a 7-month low in May, showing a figure of 54.6

after an estimate of 54.8, sharpest fall since November 2008, signalling a slowdown

in the pace of recovery but because of a new reported commitment from Germany to

the single currency, the euro shakes off the data.

· Greece nears a deal with the EU and IMF to avert a near-term default.

· US ADP employment figures severely disappoint the markets, showing only 38K jobs,

the smallest increase since Sept 2010. This sends signals to investors of a slowdown

in hiring and recovery, bringing on risk aversion helping the US dollar to strengthen

despite the weak data originating in the US. The estimate for Friday’s more

significant Non Farm Payrolls has been lowered to 100,000

· Manufacturing data also shows the pace of growth slowing more than expected,

falling to 53.5 in May from 60.4 the month before. Economists had expected a

reading of 57.7

· US stocks extended its losses immediately following the report and fell further against

the yen

· Later in the session the euro fell dropping to $1.4380 as Moody’s drop Greece’s credit

rating by 3 levels to CAA1

DATA TO LOOK OUT FOR

· 9.30 we see the UK Purchasing Manager Index for Construction, following yesterday’s

manufacturing data, it will be very interesting to see how the figure comes out

· 1.30pm we have US Initial Jobless Claims, but not expected to really move the

market too much

· US Factory Orders due at 3.00pm, will the downward trend of data continue

Current Spot Rates (9.30am)

2^nd June 2011

          USD      EUR     AUD     CAD      CHF      DKK    NOK     SEK     ZAR     JPY

GBP   1.6318 1.1340 1.5350 1.5969 1.3774 8.4520 8.8271      10.18 11.08 132.121

USD                1.4391 0.9407 0.9786 0.8441 5.1796 5.4094      6.24    6.79    80.966

EUR  0.6949               1.3536 1.4082 1.2146 7.4533 7.7840      8.98    9.77   116.509

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.

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).

Sterling hovered near a two-week high against a broadly weaker dollar on Friday as investors

liquidated long positions in the greenback, with the pound set to benefit from an

increasingly uncertain outlook for the U.S. economy.

US data on Friday confirmed a weakening economic trend. U.S. consumer spending rose less

than expected in April as high gasoline prices continued to squeeze household budgets.

Pending sales of existing U.S. homes also dropped more than expected in April, touching a

seven-month low.

"It's generally a weak dollar story today and if weak dollar dynamics carry on through this

year, GBP/USD can be drawn higher despite the fact that UK fundamentals remain poor,"

said a senior currency strategist at Rabobank.

"Cable should hit the important $1.65 level next week and that will establish a bullish trend

which could see it rise to $1.6750," said a currency strategist at FXCM. "If it

does not break $1.65, then we will see it fall towards $1.60."

Sterling slipped back from a two-month high against the euro of €1.1613, hit on Thursday

when concerns over Greece's debt crisis knocked the single currency lower, sterling's

capacity to sustain any gains would depend on UK economic data.

British consumer morale rose unexpectedly in May to its highest level this year, a survey by

researchers GfK NOP showed on Friday.

Nationwide housing data was also better than analysts had forecast. But Friday's economic

data is unlikely to ease concerns about the UK economy in the face of rising inflation and

fiscal cuts, which have led markets to price out an interest rate rise until at least the

beginning of 2012. Analysts said data showing fundamental weakness in the UK economy

could quell demand for sterling.

The manufacturing sector purchasing managers' index (PMI) will be released on June 1,

while services sector PMI data will be released on June 3. The manufacturing sector PMI is

expected to show a soft reading and a worse than expected number could weigh.

"A sharp slowdown in the manufacturing sector in May's PMI manufacturing survey would

reinforce the subdued growth outlook," Bank of Tokyo Mitsubishi said in a note.

IN THE UK

• Sterling hovered near a 2 week high against a broadly weaker dollar over the uncertain outlook for the US economy
• Consumer confidence unexpectedly rose in May to its highest level in a year.
• Nationwide house prices rose to 0.3% in May from -0.2% previously.
• In a related survey, Nationwide forecast that house prices will rise 16% over the next 4 years and most young people in the UK do not feel they will be in a position to buy their first property in the next 5 years,

ELSEWHERE

• US dollar finishes week on the back foot as investors remain concerned about US recovery, GBPUSD now back over $1.65 and EURUSD just broken $1.44
• Over the long weekend, markets traded fairly thinly but investors remain cautious about whether or not Greece will receive its next tranche of aid from the IMF and EU.
• However, the mood has changed this morning as markets are in risk appetite mode following a report in the US press that said Germany is considering dropping its drive for an early restructuring of Greek debt to help facilitate a new package of loans.
• Credit ratings agency Moodys place Japan’s Government rating on review for possible downgrade.
• Strong business confidence figures released in New Zealand strengthen the NZD and eyes move to this evening’s interest rate decision. New Zealand is struggling with its overvalued dollar, and any signs of a rise in rates may lead to further NZD strength.

DATA TO LOOK OUT FOR

• This morning Eurozone Consumer Price Index and Unemployment Rate are released, both carry a fair degree of significance so could provoke some euro volatility.
• 2.00pm sees the release of the Bank of Canada’s interest rate decision, investors are expecting rates to be left unchanged at 1.0%
• In the US at 2.45 Chicago Purchasing Manager’s Index is released, the figures form a useful tool to see trends in business activity across the US, this month’s figure is expected to fall to 63.0 from 67.6 as the recovery remains tough
• US Consumer Confidence is forecast to show a slight rise at 3.00pm to 66.0 and could help the US dollar later this afternoon.

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.