QROPS Update 11th August 2011 Pension income drawdown, flexible pensions & foreign exchange QROPS and QNUPS

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 was victim to yet another day’s volatile trading session yesterday, created by the

release of the Inflation report for the UK and Mervin Kings press conference held shortly

after.

In the mornings trading session we saw Sterling slide lower leading to the release of the

report at 10.30am. We saw Sterling slide against the US Dollar from a morning high of

$1.6321 to a low of $1.6228 ahead of the release even though previously on Tuesday

evening the FOMC had stated that interest rates would be kept at all-time lows for the next

2 years.

The release of the Inflation report showed that the Bank of England had cut their economic

forecast again for the UK from 1.8% growth in 2011 down to 1.4%. This is the second time

this year that they have cut rates down form their previous forecast of 2% for 2011. There

was also a statement that Inflation is expected to hit 5% this year and then it is expected to

fall rapidly in 2012. On the release of the report Sterling almost immediately retreated to

€1.1253 against the Euro and $1.6187 against the US Dollar.

"We can see a distinct weakening around the world, especially in the industrialised world,

but also in Asia is a slowing of the world economy ... These are risks we'll have to watch out

for," King said.

He said that adding to the Bank of England’s asset-buying programme would be a possibility

if the economic outlook deteriorated, but suggested that more quantitative easing may not

be imminent, further easing would be negative for the currency as it would add to Sterling

liquidity. Sterling then proceeded to claw back its losses on the release of this comment.

"The initial move was an overreaction. The slight downgrade in the forecast was not entirely

unexpected," said a currency strategist at Credit Agricole CIB.

Moving into the afternoon’s trading session we saw rumours take hold of the market once

more concerning the Euro debt story, as rumours suggested that France could possibly be

downgraded. This allowed the US Dollar to gain once more against the Euro and Sterling

posting lows of €/$ 1.4161 and £/$ 1.6120 whilst Sterling managed to recover against the

Euro to post a high of €1.1418.

IN THE UK

• Sterling posts a low of $1.6122 against the Dollar during the afternoon’s trading session, and a low of €1.1253 against the Euro – mainly fuelled by the release of our Inflation Report.
• Bank of England cut GDP forecasts further to 1.4% from 1.8%, creating Sterling weakness.
• Bank of England give no further signs of adding to our asset purchasing program.
• Adding to sterling woes were the rioting and looting which also darkened the outlook for sterling

ELSEWHERE

• Rumours spread that France is exposed to a possible downgrade in credit rating, creating Euro weakness in the afternoon’s trading session.  
• French bank shares fall in particular Soc Gen which fall over 18% yesterday but along with other French banks all open higher this morning.
• French Industrial Production month on month misses expectations massively posting a figure of -1.6% against a forecast -0.1%.
• German Final CPI month on month meets expectations posting a figure of 0.4%.
• US Wholesale Inventories month on month posts a figure of 0.6% and US Crude Oil Inventories posts a figure of -5.2M against a forecast 1.7M.
• Moody’s, S&P and Fitch all reaffirm France’s AAA rating which calms the markets for the time being.
• In Switzerland, the SNB have said they have a variety of measures to look at to weaken CHF, this morning it is off yesterday’s highs.
• Norges Bank keep Norwegian rates on hold, markets had expected a 25bps rise but as I wrote yesterday given the current climate a no change decision was quite likely.

DATA TO LOOK OUT FOR

• Australian unemployment rate expected at 4.9%
• ECB Monthly Bulletin released at 9am.
• US trade Balance expected at 13.30pm to post a figure of -47.9Bn
• US Unemployment Claims expected to post a figure of 401K at 13.30pm.

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.