QROPS update 5th May 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).

The UK pound has seen a raft of data releases over the past week, painting a picture of a

sluggish British economy. Yesterday was no different, starting with lending to British

consumers which rose less than expected in March whilst house prices fell at their fastest

pace since November, according to data from Nationwide.

The Bank of England data had showed that growth in net unsecured consumer lending slowed to 0.1

billion pounds in March, well below the 0.45 billion pound increase which had been forecast

in a poll by Reuters. Net mortgages also rose less than expected, with a 0.4 billion pound

increase. On a positive note, mortgage approvals showed 47,557 home purchases given the

go-ahead in March, the highest since November, although this was still less than economists’

predictions of 48,000.

Despite the rise in mortgage applications, sterling fell to a 13 month low against the euro. All

these factors make it pretty clear that the Bank of England will not raise interest rates later

today from its current 0.5%.

Over in Europe, the service sector companies eased off the accelerator slightly last month

but hiked up prices according to the latest business surveys to show that inflation is on the

rise. Growth, however, is coming at a cost, with firms increasingly passing rising costs of

commodity and energy prices on to customers.

“The PMI confirms that for now at least it is still pretty healthy growth in the euro zone.

They (prices) have been at high levels for some time now and that will be of a concern”, said

Capital Economics. Expansion was again dominated by Germany and France,

which practically masked the stagnation in Spain and slowing growth in Italy and Ireland.

In a separate set of data, Eurozone retail sales fell sharply in March, as consumers’ minds

were being weighed on by soaring prices and harsh austerity measures. The biggest monthly

decline in sales was in Portugal, where the government had secured a 78 billion euros

bailout on Tuesday but will be expected to cut debt sharply in return.

The US dollar slid further at the beginning of New York trading on the back of a

disappointing ADP Employment change report. Expectations for the index, which measures

US private sector payrolls, was expected to show a gain of around 200K for April but instead

came in at 185K.

It will now be interesting to see how tomorrows main Employment Situation will come out,

as the ADP report is considered the “curtain opener” for this report. The ISM (Institute of

Supply Management) said its non-manufacturing purchasing manager’s index fell to 56.9 in

April, compared to a reading of 57.3 in March. Analysts had expected the index to ease up to

57.4 in April.

The New Orders Index decreased substantially by 11.4 points to 52.7 and the Employment

Index fell 1.8 points to 51.9, indicating growth in employment for the eighth consecutive

month, albeit at a slower rate. Following the release of the data, the US dollar was down

against the euro, with EUR/USD jumping to hit a fresh 17-month high of 1.4939.

IN THE UK 

• Sterling falls to 13-month low versus euro on soft UK data, hitting a low of €1.1075
• Reports suggest Bank of England could look to keep record low interest rates throughout 2011
• UK construction sector activity for April grows at slowest pace so far this year.
• Consumer lending rose less than expected in March according to Bank of England data.
• House prices fall by 0.2 percent last month, the biggest drop since November 2010 according to Nationwide and expects house prices to be flat or fall further throughout the rest of the year 

ELSEWHERE 

• Eurozone service sector growth eases but ratchets up prices and passes on to customers
• The Market Eurozone Services PMI slipped to 56.7 in April from previous month’s near 4-year high of 57.2
• Germany and France see expansion yet again, overshadowing virtual stagnation in Spain and slow growth in Italy and Ireland
• Eurozone retail sales fell sharply in March, pointing to weaker household demand
• The USD falls after disappointing ADP Employment change report, which came in at 185K, less than the expected 200K mark
• EUR/USD moves to a fresh week high of $1.4939 on the back of this report
• US ISM non-manufacturing Composite fell to 56.9 in April, compared to 57.3 in March
• Aussie dollar falls as Australian Retail Sales much lower than expected.
• Ireland stands their ground and say Corporate Tax to stay at 12.5%, but will continue to look for lower interest rate on bailout plan. 

DATA TO LOOK OUT FOR 

• 9.30am see the release of UK PMI Services; a good figure today would help to repair some of the damage done by Tues and Weds disappointing PMI Manufacturing and Construction figures.   
• 11.00 Germany factory orders are published, the figure is expected to be lower than last month at 0.4, which could affect the euro. .
• Headline date today are the BoE and ECB interest rate decisions as 12.00pm and 12.45pm respectively, The BoE are expected to leave policy unchanged with rates staying at 0.5%. Slightly different consensus in the Eurozone camp, although rates are expected to stay at 1.25% after last month’s rise, there is a small chance of a rise today, but the subsequent press conference at 1.30pm is more likely to reveal plans for a rise in June.
• Fed’s Bernanke speaks later today, after his dovish comments last month the tone of this meeting is unlikely to be upbeat.  

 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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