QROPS update 19th August 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).

Sterling reached a near 3 ½ month high against the dollar on yesterday as concerns about

the US and euro zone economies fuelled demand for the UK currency, with traders saying

the market was positioned for further sterling gains. Sterling spent most of the day trading

around the 1.6523 mark just within sight of Wednesday’s high of 1.6590 levels last seen at

the beginning of May.

At 9.30am we saw retail sales only grow slightly last month as cash strapped consumers

remained under pressure the figures showed. Sales volumes excluding petrol rose 0.2% in

July, a slowdown on the 0.8% increase in June, said the Office for National Statistics (ONS)

Sales of household goods, footwear and clothing all declined.

Consumer spending continues to be affected by a number of factors, including higher

inflation, job losses and limited wage rises. Compared with July 2010, sales volumes

excluding fuel were also 0.2% lower. When fuel sales are included sales were unchanged

from a year ago.

The 0.2% rise in volume retail sales in July was less than the 0.3% increase expected by

analysts, and was also lower than the 0.6% increase estimated by the British retail

Consortium, earlier this month.

There is an enormous amount of bearishness against the dollar, data has not been good.

Risk has been a bit calmer this week and that has coincided with sterling breaking out of its

recent range above $1.6475 pretty convincingly” said a leading research director. Technical

charts suggest the next level of topside resistance for sterling is around $1.6740, the late

April high.

Against the euro sterling did manage to break the €1.15 level in mid-afternoon trading with

persistent concerns about the euro zone debt crisis spreading to engulf the regions core

economies keeping the single currency tightly range bound.

“People are seeing sterling as the best of a bad bunch” a London based trader said. “The

euro isn’t good, the dollar isn’t especially good. Its unusual not to see any downside stops in

cable but that indicates the way the market is going”

IN THE UK

• UK retail sales disappoints by only growing 0.2% in July compared with the 0.3% forecasted- causing sterling to drop initially in early trading
• By mid-afternoon sterling recovers losses to spend most of the day trading around the $1.6525 level
• Sterling breaks the €1.15 level as concerns persist about the Eurozone debt crisis
• Technical charts suggest the next level of topside resistance for sterling against the US dollar is around $1.6740, the late April high
• UK Public Sector Net Borrowing posts a figure of -£1.961bn, generally a deficit is beneficial to pound strength and this morning the pound has seen small gains against the US dollar.

ELSEWHERE

• Dollar weakens due to recent figures not being good and risk aversion has been calmer this week
• Philadelphia Fed Manufacturing figures in the US dropped to 30.7, the lowest since March 2009 renewing concerns of a double dip recession.
• President Obama said US economy is still growing and doesn’t need exceptional measures but US existing home sales fall 3.5% in July causing more woes for the dollar.
• Concerns persist about the Eurozone debt crisis, the EURUSD drops back into the 1.42’s as investors struggle to decide which is the safer bet, euro or US dollar.
• US CPI rises sharply in July to 0.5% beating expectations of a 0.2% rise
• Japan’s finance minister Noda has said he is ready to make another “surprise” intervention to weaken yen strength. So the secret is out now, we wait for his intervention, I wonder if the markets will find it surprising.

DATA TO LOOK OUT FOR

• A quiet day for data finishes off with Canadian Consumer Price Index at 12.00. The component figures are mostly expected to rise, however the most important, Annual CPI is expected to drop to 2.8% from 3.1% last month. If the drop doesn’t materialise CAD could see healthy gains.
• With the stock markets in tatters and even the pound being referred to a safe haven currency, gold is seeing massive gains, currently trading at highs of $1858 this morning. It will be interesting to see where it trades in the US sessions today.

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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