QROPS update 14th July 2011 Pension income drawdown & 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).

Wednesday saw a day lacking of major data being released which paved the way for risk

sentiment to determine the trading pattern and volatility for the day.

Sterling started the day fairly muted opening the day at €1.1390 against the euro and

$1.5912 against the US dollar. Sterling traded the majority of the morning fairly quiet as no

UK data was released.

EU data that was released at 10am in the form of their industrial production which posted

figures of 0.1% against forecasted figures of 0.5%, this allowed sterling to push above the

€1.14 figure to post a day’s high of €1.1406. However during the course of the morning the

Euro did strengthen and post lows of GBP/EUR €1.1299.

The main issue with regards to the euro is still being headed by the debt story, the successful

Italian bond auction that occurred Tuesday afternoon seemed to slightly squash the woes in

the market concerning yet another EU state requiring a bailout.

Across the pond, the day was headed by one major risk occasion being Fed Chairman Ben

Bernanke’s press conference at Capitol Hill. This followed the FOMC meeting minutes that

were released Tuesday evening (UK time). During this press conference Bernanke tipped for

further quantitative easing to take place within the US economy, on this comment we saw

GBP/USD rally to post new daily highs of £/$1.6119 and €/$1.4192.

Bernanke also commented on recent worries of a US default, due to the budget deficit figure

nearing its ceiling, he explained that if this was to occur then the effect would be

tremendous, he added further that if the US were to default then this would seriously

hamper job creation moving forward.

As further comments were added concerning the failure to raise the debt ceiling will risk

future interest rate rises and he urged further to congress caution with regards to the

timings of spending cuts within the system.

Looking ahead to today’s trading session and data expected to be released within the

market, we have the Eurozone CPI figures measuring the inflation figure and the market will

be looking to see if the ECB are keeping inflation within their target 2-3%.

Across the pond there is a host of high impact data in the form of Core retail sales month on

month figure expected at 0.1%, Retail sales expected to post a figure of -0.1%, and we also

have the PPI data and Unemployment claims all due to be released at 1.30pm. Ben Bernanke

will also be testifying further at 3pm.

IN THE UK

• GBP/EUR post high of €1.1406 during the early London session but falls back and ends the day hovering around the mid €1.13’s
• GBP/USD spent the majority of the day at or around $1.5950 but shot up to $1.6110 in a matter of minutes as remarks from Fed Chairman Bernanke conference speech filtered around the markets and caused a dollar sell off.
• UK’s Claimant Count Change went up to 24.5k against a forecast 15.1k, showing more people have signed on however the overall Unemployment Rate remains unchanged at 4.7%.

ELSEWHERE

• EU Industrial production misses expectations posting a figure of 0.1% against a forecast 0.5%
• Fed Chairman Ben Bernanke testifies, creating volatility within the market when discussing the possibilities of a US default. He said the Fed would do everything in its power to keep the economy stable and if that meant further stimulus (QE3) then that would be the route the Fed would take. This had a negative effect on the US dollar and caused EURUSD to rise to $1.4165 from below $1.40 early in the session.
• CREDIT RATING NEWS – Moody’s place US on review for possible downgrades, Fitch drops Greece to CCC
• US debt talks continue without any sign of a resolution, Obama is reported to have walked out of meeting and is willing to put his presidency on the line in order to get his own way in deficit talks.
• US Crude Oil Inventories posts a figure of -3.1M against a forecast -2.1M failing to meet expectations.
• New Zealand GDP shows a slight increase and helps NZD move about 0.8500 against USD
• China GDP figure stays in line from previous months reading at 9.5%

DATA TO LOOK OUT FOR

• Eurozone CPI reports are released this morning and are expected to show inflation remaining at 2.7%,
• US Retail Sales are due at 1.30pm and expected to remain flat for the month at 0.0%
• US Unemployment Claims due to post a figure of 413k against 418k posted last month, last week NFP was far worse than expected so eyes will be on this figure.
• US Fed Chairman Ben Bernanke testifies again at 3.00pm and after yesterday’s meeting expect some fireworks if he surprises the markets again

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.

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