Foreign Exchange Report QROPS
In conjunction with investment returns, currency exchange continues to concern many expats with UK Pensions and QROPS.
Continuing our daily look at factors affecting currencies allows 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.
Sterling fell to a 13 month low against the dollar on Monday and slipped versus the euro as concerns about Britain's spiralling budget deficit troubled the UK currency.
The pound later regained some of its losses against the dollar, following a short covering rally in the euro, but analysts said its downward trend remained intact as investors shy away from assets of many highly-indebted countries.
Britain's new coalition government said on Monday it would outline £6bn of 2010 spending cuts next week, and new Chancellor of the Exchequer George Osborne said he would announce his first budget on June 22.
Osborne also launched a fiscal watchdog body to ensure the new Conservative-Liberal
Democrat government was held to account on tackling the deficit, and said most of the
2010 spending cuts would be used to reduce borrowing.
The markets are keen to see how quickly the new government would tackle Britain's budget deficit, which is running around 12% of GDP roughly £163bn.
Analysts felt sterling would remain under selling pressure ahead of the budget, as risk aversion remains high. One in particular said, "The budget will be key. The main concern for the country at the moment is the size of the deficit, and that's going to be the first full blown explanation of what sort of belt-tightening measures we are going to see," "At least until then, I would expect to see selling into any sterling rallies."
Sterling fell as low as $1.4249 during Asian trading before reaching a high of $1.4545, dragged higher by a climb in the euro, which clawed its way back from a four-year low after intense selling in the single European currency, seen at a bargain price resulted in a broad pullback in the dollar. The pound lost around 2% against the dollar last week.
The pound saw a mixed day against the euro, reaching €1.174 before falling back to €1.166 during the course of the session.
That slide helped increase net short positions in the pound -- essentially bets the currency will fall -- to a record high last week as investors continue to batter the pound.
This is in contrast to last week where net short sterling positions had almost dried up completely as strategists changed their outlooks, favouring the pound.
Data showing a slowdown in UK house price growth kept the pound under pressure, as it reminded investors about the fragile state of the domestic economy.
Property web site RightMove said asking prices for British residential properties rose more slowly in May than they did in April in a sign that the past year's run-up in the housing market may be cooling off.
Traders brushed off strong manufacturing figures released on Monday as the market focused on movements in the euro and the UK's deficits. The Confederation of British
Industry said its manufacturing order book balance rose to -18 in May, jumping from -36 to hit its highest since August 2008.
Gerard Associates Ltd advises expats and people considering living abroad on the options available for Pensions, QROPS 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 reassurance and security of UK authorised and regulated advice.