strategist

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).

We saw Sterling dip against the dollar on Tuesday as investors took profit on the previous

session's rally in risk assets, and it looked vulnerable to further selling after mixed economic

data released failed to alleviate concerns about poor UK economic fundamentals.

Manufacturing Output data for August released on Tuesday presented a mixed picture of UK

growth, with industrial output unexpectedly rising 0.2% on the month while

manufacturing output dropped 0.3%. Sterling showed little reaction immediately after

the data, but did post a trading low of $1.5602.

"All in all the data was a mixed bag, there was a small discrepancy between industrial

production and manufacturing. But overall the trend is still for lower production and that

should really not benefit the pound," said an analyst at Danske Markets.

The pound has rallied since hitting a 14-month low last week on news the Bank of England

would restart its asset purchase scheme, known as quantitative easing (QE), sooner than

expected to try and kick-start Britain's ailing economy.

But analysts said lacklustre economic data and comments by Bank of England policymaker David Miles

defending QE added to the impression UK monetary policy could remain extremely loose for

some time.

The Euro fell from its highs against the USD as Slovakian lawmakers prepared to vote on a

proposal to revalue the regions bailout package, however the Vote was postponed due to a

coalition partner SaS held back from the vote. The 17-nation Euro slumped even as a

European Union, International Monetary Fund and European Central Bank team approved

the next tranche of aid to Greece.

“We are seeing a bit of correction in the Euro after yesterday’s move up,” said a currency strategist at UBS AG in London. “There are some concerns about the Slovakian

vote. While the bottom line is that they will eventually approve it, it might be delayed, and

that creates more uncertainty.”

Across the pond was very quiet, as no major or mid-level data was released as traders

returned to the office after yesterday being a national bank holiday in the form of Columbus

Day.

Looking forward to today the major pieces of data are being released from the UK and the

US. The first comes from the UK in the form of the Claimant count of which is being released

at 9.30am which is then followed by the release of FOMC meeting minutes at 7.00pm where

the market will be paying close attention to the tones of the language used.

IN THE UK

• The pound falls against the dollar over the course of trading session falling from a high of $1.5664 to post a low of $1.5581.
• A mixed bag of data released from the UK in the morning showed Manufacturing output for the month of August missed expectations but Industrial production beat expectations.
• NEISR Flash GDP estimate released at 0.5% against a previous posted 0.4%.
• The negative sentiment towards the BoE’s shock increase to QE last Thursday is wearing off and is now seen as a positive to the pound.
• UK Claimant Count rises by 17,500, slightly better than the forecasted 23,900. On a less positive note, the ILO Unemployment Rate rises to 8.1%, showing business conditions in the UK remain bleak
• EU member Barrosa has been urging the UK to help in the second Greek bailout, so far the UK have stood their ground apart from the obligations through its IMF membership.

ELSEWHERE

• Greece gets their 6th tranche of bailout package confirmed from the ECB even though they will miss their 2011 targets and be in recession for longer.
• The Euro fell from highs of €1.1510 to post a daily low of €1.1435.
• Trichet makes a statement that the Eurozone debt contagion has become systemic and is a real risk for the region.
• Slovakia fails to reach agreement on the revised plans for EFSF due to one of the coalition partners, Freedom and Solidarity (SaS) completely abstained from the vote.
• Canadian Housing Starts beats expectations to post a figure of 206k against an expected 176k originally forecast. 
• No economic data released from the US as they return to the office after Monday’s bank holiday. 

DATA TO LOOK OUT FOR (all times UK BST)

• Eurozone Industrial production to be released at 10am expected to post a figure of -0.8% against previous months reading of -0.9%.
• In the US they are due to release the FOMC minutes for the previous interest rate meeting 3 weeks ago, where the market will be paying attention to the tone of comments made.
• ECB’s Trichet address a conference at the AFME in London this evening at 7.30pm
• Minutes from Bank of Japan Monetary Policy Meeting are released 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).

Sterling managed to make gains across the board yesterday most notably against the euro and dollar as there was a slight improvement in risk appetite with investors.

The pound reached a session high of €1.1557 up from the low of €1.1445 achieved in early trade.

Against the dollar sterling reached a high of $1.5554 from the low of $1.5431.

The pound strengthened for the 2nd day in a row against a weaker euro as concern mounts that the European policy makers will fail to agree to a resolution to the areas debt crisis. There was also talk the European Central Bank may need to cut rates to help the struggling euro zone economy.

Traders also said the pound was aided by talk of a UK clearer needing to convert dollars into sterling as part of its quarterly dividend payment.

Sterling dipped briefly in the morning after Bank of England policy maker Ben Broadbent said the UK currency was likely to remain weak for some time and that a weak global economy would put downward pressure on UK inflation. He also stated that inflation expectations remain under control and that Quantitative easing may help the banking system by boosting nominal growth.

Despite sterling gains on Monday it must be noted that the pound may remain vulnerable to selling against the dollar on on-going concerns over the fragile UK economy which may lead to further monetary easing.

"Anything related to the risk of more QE in the UK will be zeroed-in on by the markets," said a currency strategist at CIBC.

"Sterling/euro could see a bounce down towards €1.1428 if we see continued dovishness from the MPC," said a currency strategist at Westpac.

Adding that sterling was likely to be side-lined until further negative news emerged out of the UK

as markets focus on the euro zone and on European leaders' proposals to shore up the bloc's EFSF bailout fund.

IN THE UK

• Sterling makes gains across the board yesterday after there is an improvement in risk appetite with investors.
• The pound reaches a session high of €1.1557 against the euro and $1.5554 against the dollar.
• Despite sterling’s gains on Monday the pound remains vulnerable to selling versus the dollar over concerns that a weak UK economy could prompt the BoE to resort to further monetary easing.
• Bank of England policy member Ben Broadbent states the UK currency could be weak for some time because of a weak global economy, continuing that further quantitative easing may help the banking system by boosting nominal growth. This helps rumours continue for a Nov 10^th rise in QE.

ELSEWHERE

• A slight return to risk as European Finance Ministers begin to finally appreciate the severity of the task ahead causes USD to weaken cross the board and send Asian equities up 3% this morning.
• A 50% Greek default is looking the most likely outcome under a general plan to reduce the budget deficit of periphery nations.
• Greek finance ministers outline latest austerity measures today as speculation continues as to whether or not they will receive the nest tranche of bailout fund.   
• Expectations are that the SPV would be able to buy bonds and use the proceeds to buy European sovereign debt, without the ECB needing to expand its balance sheet.
• One of the biggest concerns facing the increased €2 trillion limit on the European Financial Stability Fund is German public opposition, they are fed up of having to carry the debt of neighbouring nations whose government’s policy have caused them to wind up in this situation.  
• Talk continues of a interest rate cut at the next ECB meeting on October 6th, will it be 25 or 50bps
• This morning German consumer confidence rises to 5.2 against the expected figure of 5.1.

DATA TO LOOK OUT FOR (all times UK BST)

• 11.00 CBI Distributive Trades Survey is released, the figure is expected to match last month’s disappointing -14% as conditions in the UK retail and wholesale sectors remain tough
• US Consumer Confidence is released at 3.00pm and the markets are hoping for a rise following the recent statements from the Fed and President Obama outlining plans to increase growth and reduce debt
• Fed member Lockhart addresses a press conference at 5.30pm  

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).

On Tuesday, the markets were looking at data releases from all the major economies after

the lack of news from the previous trading day. The better than expected German

manufacturing data boosted the Euro, and this in turn helped push up the Pound against the

US Dollar. These gains were somewhat restricted as traders anticipated a report released

mid-morning in the UK that was expected to show a downturn in factory orders. Sterling

continued to benefit from investors seeking out safer alternative currencies despite not all

being rosy in the UK economy. The Euro-zone debt problems and continued weakening

growth in the United States have done nothing but help the appeal of the British Pound.

Investment in other currencies across the world, namely the Swiss franc and Japanese yen

has dampened due to the risk of state intervention creating sudden volatility.

“Sterling is gaining because it is not the Euro and not the Dollar and people have been

rewarding the UK government’s efforts to cut borrowing,” said a currency strategist at nabCapital.

In Germany, Europe’s biggest economy, output grew across both manufacturing and services

but showed the weakest rate of expansion for almost two years. The French service sector

saw growth pick up in August but manufacturing output fell for the first time since June

2009. Outside the Euro-zone’s two largest economies, output fell for the third month in a

row.

The Eurozone economy grew only marginally again in August, suggesting that recent months

have seen the weakest expansion for two years,” said Markit’s chief economist. “The data raises the prospect that economic growth in the third quarter could

be even slower than the disappointing 0.2% rise seen in the three months to June. Most

worrying is the near –stagnation in Germany, which suggests that the region’s main engine

of growth has stalled.”

As the morning carried on, GBP received a surprise boast from its back yard as a survey from

the CBI showed that UK manufacturing orders have been better than expected in August.

The Industrial Trends survey found fractionally more manufacturers reporting orders above

normal than those reporting below normal levels. This showed an improvement from July

and the latest survey also found price pressures had begun easing after six months of high

inflation. There was however a warning that there could be trouble ahead for UK

manufacturers.

“Inflationary pressures have eased since the start of the year, with fewer firms predicting

they will have to raise prices at the factory gate over the coming quarter,” said Richard

Woolhouse from the CBI. “But the risks to manufacturing activity and business confidence

have if anything increased, due to market volatility and the recalibration of growth

expectations worldwide.”

UK data being released later this week include a CBI survey on retail sales on Thursday and

the second estimate of second quarter GDP arriving on Friday. The major release of the

week comes out of the U.S. as investors await U.S. Federal Chairman Ben Bernanke at the

central bank conference and how he may intervene further to revive their struggling

economy.

IN THE UK

• Sterling makes gains against the US Dollar as it reacts positively to German manufacturing data.
• Pound receives an unexpected boost from a better than expected UK manufacturing survey which reported an ease in inflationary pressures.
• Manufacturers warned of tough times ahead due to market volatility & recalibration of growth expectations.
• Positive GBP sentiment was also helped further by an unexpected increase in BBA mortgage approvals.  
• GBP/USD traded between the ranges of 1.6453 & 1.6572.

ELSEWHERE

• In Germany, data showed output grew both in manufacturing & services but at the weakest rate for nearly two years.
• Richmond Fed manufacturing data was worse than expected and New Home Sales fell more than expected which failed to bolster the USD
• Investors count down the hours to the Jackson Hole speech on Friday where Ben Bernanke will address the pressing issues facing the US economy. Will there be further intervention and could this be the start of the QE3
• Eurozone debt problems are still pressing as Finland threatens to withdraw from Greek bailout because of serious lack of collateral. Media suggests that other countries are looking at non cash assets for collateral such as property and land in Greece.
• Moody’s downgrade Japan from Aa3 from Aa2 but level outlook at stable.
• EURUSD has a strong morning in the Asian heading towards 1.45 but falls as the European markets open as German IFO figures in all components drop below the consensus expectations.

DATA TO LOOK OUT FOR

• At 10.00am Eurozone Industrial New Orders are expected to show a slight decline to 11.9% on an annualised basis.
• US MBA Mortgage approvals at 12.00pm will give a indicators of how the US housing market is performing.
• US Durable Goods Orders are released at 1.30pm, a healthy rise to 2.1% is expected which could help the US dollar recover some of its recent losses.
• Retail Sales in New Zealand published at 11.45pm this evening are expecting to show a decline to 0.6% in the second quarter from 0.9% previously.

 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.