QROPS update 28th June 2012 Pension drawdown and QROPS & 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).

IN THE UK

It was a fairly quiet day of trading yesterday ahead of the key Eurozone summit starting today as markets await news over the uncertainty surrounding Europe.

Sterling rose to a high of 1.2521 against the euro yesterday before falling back and finding support at the low of 1.2475.

Against the dollar sterling reached the morning high of 1.5640 before falling to the low of 1.5546.

The Confederation of British Industry said yesterday that UK retailers reported a sharp rise in sales in June, as the royal jubilee weekend lured shoppers onto the high street.

UK mortgage approvals in May fell to the lowest level in a year to 30.2k from 31.2k previously, this adds speculations the BoE will be forced to resort to further QE over the coming months.

UK house prices posted the biggest annual drop since August 2009 in June, as a lack of activity amid a weak economic backdrop and tight lending conditions weighed on home-sellers' pricing power.

WORLDWIDE

Italy held a disappointing bond auction yesterday selling €9bn worth of 185 day bills at an average yield of 2.95%, up from 2.1% on May 29th. Italy is also scheduled to sell as much as €5.5bn of 5 and 10 year bonds today.

Chancellor Angela Merkel's cabinet yesterday approved the draft 2013 budget that puts Germany on track to achieve a nearly balanced budget. The government expects new borrowing of about €18.8bn next year and €13.1bn in 2014. The structural deficit, which takes account of swings in the economic cycle, is expected to be about 0.35% of GDP.

The budget committee of Germany's parliament yesterday approved legislation to create a permanent euro zone bailout fund and ratify the European fiscal pact on improving integration of Eurozone budgets, according to a parliamentary official. The committee sets the stage for parliamentary approval to create the European Stability Mechanism and approve the fiscal pact in a vote by the full assembly Friday evening.

Across several German states annual consumer price inflation in June fell further below the 2% threshold, the European Central Bank's definition of price stability, giving the central bank even more room to cut interest rates next week.

German Chancellor Angela Merkel closed the door to joint euro-area bonds as a means of lowering Spain’s borrowing costs, saying they are the “wrong way” to achieve the greater European integration needed to stem the debt crisis.

US home sales rose to 5.9% in May reaching the highest level of the year so far, showing positive signs the US housing market is recovering.

US Manufacturers orders for durable goods grew by 1.1% in May. Manufacturing has played a key role in the economic recovery, including being a significant source of new jobs. However, job creation in the sector has slowed along with the broader economy in recent months.

The euro approached the lowest level against the dollar in more than 2 weeks ahead of the EU summit falling from 1.2508 before testing the resistance level of 1.2442. The key levels to watch are 1.2585 and 1.2440 respectively with a close above 1.2585 opening the door to a corrective upside of 1.28-1.30.

France is considering a tax on oil companies and gas distributors as it looks for ways to meet budget deficit targets, French government spokeswoman Najat Vallaud-Belkacem said yesterday. France needs to raise around 10 billion euros to meet its deficit target this year. The government has said most of that amount will come from tax hikes.

The yen has climbed 9.5% in the past three months, the biggest gainer among the 10 most traded currencies. The dollar was the second-best performer with a 4.2% advance, while the euro lost 3%, the biggest drop.

The Canadian dollar dropped against most of its major counterparts on speculation dimming prospects for global growth will prevent the Bank of Canada from raising interest rates.

DATA RELEASES (GMT) 

Today    Euro summit commences.

09:30     UK Current Account

09:30     UK Final Print GDP for Q1 expectations are to see -0.1%.

10:00     European Consumer Confidence for June.

10:00     European Business Climate for June.

13:30     US GDP Annualized for Q1 expectations are to see 1.9% from 2.2%.

13:30     US Real Personal Consumption Expenditures.

17:00     US Fed’s Fisher speech.                                                                                                                                                                                                               

INTERBANK RATES (09.00 GMT)

GBP        EUR                        USD                        HKD                       AUD

GBP        1.2496                   1.5557                   12.0700 1.5440

EUR        0.8004                   1.2450                   9.6595                   1.2358

USD        0.6426                   0.8026                   7.7585                   0.9919