QROPS update 12th July 2012 Pension drawdown and QROPS & QNUPS

• The pound saw a boosted demand for the relative safety of the U.K. currency yesterday as it emerged there would not be a quick judgement from a German court regarding the utilisations of the European Stability Fund.
• Ex BoE policy member Andrew Sentance was quoted as saying it might have been right to respond to the subprime crisis by providing extra monetary stimulus. But now that is not the right policy, and in his view it was a mistake for the MPC to return to Quantitative Easing last week.
• Bank of England policy member Adam Posen was quoted as saying the UK's economic recovery is not satisfactory despite promising data on jobs and exports. Posen also sited that banks are too cautious and has urged them to lend more.
• Today the U.K. is scheduled to auction £3.5bn bonds maturing in September 2022.
• GBPEUR hit a fresh high of 1.2704 yesterday, a level not seen since October 2008. Yesterday’s high will act as intra-day resistance today with 1.2750 still being the traders topside target. Positive news from Europe will be needed to counteract the euro outflows caused from the ECB rate cut last week.
• GBPUSD also gained against the US dollar yesterday reaching a high of 1.5576 as the dollar weakened amid investor caution ahead of any potential hints towards further asset purchasing in last night’s FOMC minutes. Late last night the US dollar rallied as the minutes failed to signal further QE as immanent. GBPUSD will still need to break the support level of 1.5450 to suggest further downside is possible.

WORLDWIDE

• Germany sold 10 years bonds at record low yesterday, as worried investors remain willing to forgo real returns in exchange for keeping their funds safe. Germany sold €4.153bn at an average yield of 1.31% below the 1.52% at the previous auction on June 13.
• Spanish Prime Minister Mariano Rajoy yesterday announced more austerity measures totalling €65bn through to the end of 2014 in an effort to meet new budget deficit targets agreed with Eurozone partners. The new measures include an increase in the standard rate of value-added tax to 21% from 18%, a cut in jobless benefits for new claimants, a salary cut of around 7% for state employees, and billions of euros in savings from local government reforms.
• Bank of Italy Governor Ignazio Visco said in a speech yesterday.” The gap between Italian and German government borrowing costs are “unjustified” by economic fundamentals and reflect "remote" fears Europe's currency union will break up,"
• Federal Reserve officials are open to a new round of economic stimulus however failed to highlight exactly what could trigger this action. The comments seem to remove quantitative easing off the table for August.
• Following this announcement the dollar rallied across the board driving investors to the greenback as a refuge against slower global economic growth.
• EURUSD hit fresh two years lows of 1.2210 this morning creating a target at the next support level of 1.2135, any bounce from here sees initial resistance up at 1.2330. The euro also hit multi-decade lows against the Australian and New Zealand dollars as currency dealers opted for the higher yielding currencies.
• The U.S. trade deficit narrowed for the second straight month in May to $48.68bn, as exports picked up and falling oil prices helped drive down imports.
• A Chinese official with the country's statistics bureau said yesterday that the Chinese economy is expected to recover in the second half of the year following recent loosening measures.
• The yen erased gains versus the euro and dollar as investors changed their preferred safe haven.
• The Canadian dollar fared well yesterday as a higher yielding currency, the countries May trade deficit was larger than forecasts mainly due to imports reaching a record level.

DATA RELEASES (GMT)

INTERBANK RATES (09.00 GMT)