QROPS update 15th February 2011 Pension 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 or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension, 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, QROPS and now QNUPS (Qualifying non UK Pension schemes).
Sterling was firm on Monday ahead of UK inflation data and the Bank of England's quarterly report, with expectations for an interest rate rise in the near term providing strong support.
Traders said the pound was helped by demand from Middle East accounts. Some also cited sterling-supportive M&A news, with General Electric Co set to buy the well support division of UK energy services company John Wood Group for about $2.8 billion.
Inflation data on Tuesday is expected to show annual CPI jumped to 4.0% in January, well above the central bank's 2% target. Focus, however, will centre on the Bank of England’s inflation report on Wednesday, where it is expected to revise up near-term inflation projections.
Sterling came off lows against the dollar to trade at $1.6010.It held above the $1.60 level, having closed above there on Friday. Traders said fix-related selling saw the pound fall to a low of $1.5982 earlier in the session.
Technical analysts said a drop below $1.60 could pave the way for a move towards $1.5920, the 38.2% retracement of the pound's December-February rally.
Against a subdued euro, sterling made solid gains. The euro was down 0.6 % at €1.1887, not far from sterling’s high hit last week of €1.1920. The euro was sold across the board. It fell to a three-week low against the dollar as it was hit by fresh worries about Europe's banking system which weighed on sentiment already depressed by concerns about euro zone peripheral debt.
Those worries had led investors to rein in expectations of a near-term interest rate rise by the
European Central Bank.
In contrast, expectations the Bank of England will raise rates by mid-year remained high. The Bank of England left rates on hold last week, but markets are almost fully priced for a hike in May and a further two rises by the end of the year.
Until now the Bank of England has been confident price pressures would be temporary and a shift in that view would add to expectations for a rate hike.
Data on Friday showed UK producer input prices rose 13.4% on the year in January, highlighting the on-going pick-up in inflation.
However, there are concerns about weakness elsewhere in the UK economy and further data this week, including jobs data on Wednesday and retail sales figures on Friday, will also be closely watched.
The economy contracted in the fourth quarter of 2010 and concerns are growing that job losses will mount, hurting consumer spending at a time when the government is cutting spending. "This combination of higher inflation and lower growth will be a medium-term negative for sterling.
Hence, we expect any sterling gains to prove unsustainable and we view the pound's rebound into the $1.6180/1.6200 area as providing a selling opportunity," BNP Paribas said in a note.
Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for 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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