QROPS update 7th January 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).

Thursday saw sterling gain against the euro but weakened against the dollar, due to the poor technical outlook for the pound. The weather we have experienced lately was a major contributing factor regarding the poor PMI figures, showing that we suffered the first fall in output since April 2009.

“I don’t think we should read too much into it. We had such massive dislocation from snow and we know from January of last year how much of an impact that can have. It’s misleadingly weak and I expect a bounce-back in January”, said a UK economist at Societe Generale.

We saw the pound fall over half a cent versus the dollar to trade at $1.5462, down around 0.3% on the day, after having fallen around 1% on Wednesday, after strong US economic data boosted hopes of a stronger US recovery.

Renewed concerns over the euro zone periphery proved to be weighing down on the single currency, with Spain being the centre of attention, as the market sees their debt issuance next week as a key risk, following Portugal having to pay higher yields in a Treasury Bill auction on Wednesday.

“The bad news is the euro area remains deeply split economically. Peripheral countries cannot keep up with Germany’s high pace of growth,” said economist at Commerzbank.

On a positive note, euro zone economic sentiment jumped to a 38-month high in December, pointing to a healthy growth in the last quarter of 2010. Manufacturing orders also showed itself growing at the strongest pace in 10 months in November, mainly due to the strong demand for durable goods coming from outside of Europe.

The ECB however, is likely to keep its interest rates at a record low of 1.0% with countries such as Greece, Ireland, Portugal and Spain struggling with market pressure to bring their finances back in order.

Further headache for the ECB is the sharp rise of inflation expectations among consumers and businesses, the commission data showed, mainly from higher energy and food costs.

November saw retail sales fall 0.8% month-on-month for a 0.1% year-on-year increase and October retail sales were revised lower. Expectations from economists were for a 0.3% rise on the month and 2.15% year-on-year.

The dollar remained buoyed after a stronger than expected US ADP employment report on Wednesday, resulting in expectation for today’s non-farm payrolls data to be positive. The report showed a record 297,000 private-sector jobs were created in December, reinforcing views that the country is actually on a steady path to recovery and sending US Treasury yields higher across the curve, giving a further lift to the dollar.

“If the key jobs data shows a jobs gain of 250,000 to 300,000 and the unemployment rate drops, it would further boost yields and support the dollar,” said chief manager at Bank of Tokyo-Mitsubishi UFJ in Tokyo.

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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